By Niamh Lockwood, Graduate Economic Analyst, Pegasus Group
The housing shortfall is often discussed in terms of economics, demand and viability, but its impact on public services, particularly our healthcare services, may be even more significant.
Pegasus Group’s analysis shows that the Mayor of London’s July 2026 draft London Plan provides for around 558,000 homes over ten years. This number of homes falls significantly short of the assessed need of 850,000 – a gap of around 300,000 homes. The opportunity cost of this shortfall extends beyond housing supply and economic output, with the potential to impact the recruitment and retention of healthcare workers in London.
The real cost of London’s housing shortfall on health services
In the capital, failing to build the number of homes in demand measurably affects public sector services, staff retention, and ultimately patient outcomes.
Take a typical nurse practitioner salary of £54,320 (net income after tax and 5% pension: £40,437.10), and the average 2025 London house price of £527,000 (nearly 10x gross salary). Then consider that mortgage lending is capped at 4–4.5x salary; from these calculations, a household would need a total annual income of £130,000. This is significantly higher than the average nurse practitioner’s salary (£54,320), impacting their ability to get onto the property ladder.
Unable to afford housing, whether through a mortgage or the similar outcome of renting, practitioners in the capital face significant financial pressures, making it even clearer that homeownership is out of reach without major savings or financial support.
As a result, an unaffordable housing market undermines London’s ability to attract and retain the workforce its economy and public services depend on. This 300,000-home shortfall harms public services by driving experienced staff out of the capital and, in turn, forcing higher recruitment and training costs, adding pressure on service delivery and the remaining staff.
A workforce loss, driven by high house prices, then begins to affect how National Health Service (NHS) services perform. A recent survey by NHS Homes Alliance found that 68% of NHS workers say a lack of affordable housing is a key factor that could influence their decision to leave their current employment within the next two years.
In 2024 alone, 415,000 Londoners moved out of the capital (a 28% increase since 2014), driven up by high housing costs and lack of housing supply, depleting mid- and lower-paid key workers. Without these middle-bracket key workers, London faces severe shortages in providing vital healthcare to its 9.1 million residents, with potential implications for the quality and accessibility of patient care.
Poor housing costs the NHS around £100.1m annually in London.
Beyond the affect of housing on NHS workforce and retention, it is also likely to increase the health burden associated with poor housing conditions by limiting households’ ability to move into safer, high-quality accommodation.
According to the Greater London Authority (GLA) poor-quality housing already drains over £100.1 million annually from London’s NHS budgets.
The provision of delivering these 300,000 homes could help many households find suitable accommodation and reduce the £100 million currently being drained by a third and save an estimated £30-35 million a year in avoidable healthcare spending.
Delivering housing need not only creates short-term savings but also reduces year-on-year costs, saving the NHS millions in avoidable spending and helping retain the key healthcare workers the city relies on. Those additional homes are now out of the Plan, and with them goes the relief additional housing would provide the NHS.
Could a housing shortfall undermine Burnham’s plans for a National Care Service?
Adding to this, the new Prime Minister has voiced plans to launch a National Care Service (NCS) for England, another institution that will also fall flat if accommodation numbers are not sufficient.
The NCS, an NHS-style adult social care service for England, would aim to become a vital public service and face the same challenges currently facing the NHS. Building and sustaining a new care workforce will be impossible without the homes to house them.
Housing is essential, and it must be affordable to retain staff; otherwise, the idea risks failing before it even starts.
Conclusion
As we’ve said before, the opportunity cost of the July 2026 draft London Plan extends far beyond just homes lost. The 300,000-home shortfall, compounded demand, and weakened workforce resilience put further pressure on our healthcare services.
The housing shortfall risks constraining London’s long-term growth by limiting the workforce and housing capacity needed to support a globally competitive economy.
Now that the draft London Plan consultation is closed, Sadiq Khan and his cohort must act on the concerns this 300,000-home gap creates. Protecting London’s public services requires treating home building, especially affordable home building, as indispensable infrastructure.
