New City Hall analysis shows detrimental impact of capital’s housing crisis on public sector recruitment

• New analysis conducted by City Hall reveals alarming link between capital’s housing crisis and stagnant public sector recruitment
• Recent data shows London significantly lags behind the national average in public sector recruitment growth 
• Public sector workers, including frontline nurses, teachers, firefighters, social workers and police constables, living in London spend significantly more of their annual income on housing costs compared to their counterparts living outside of the capital
• New analysis reveals an entry-level police constable living in London spends more than half of their gross salary on rent, versus 38 per cent in West Suffolk which represents the UK median
• Mayor renews his call on Government for urgent investment into London’s affordable housing delivery to safeguard public sector recruitment and retention

The Mayor of London, Sadiq Khan, is today warning that the housing crisis is putting enormous strain on public sector workers in the capital, as new City Hall analysis reveals the grave consequences of stagnant public sector wages and rising housing costs on public sector recruitment and retention.

City Hall’s new report looks at what this could mean for a typical public sector worker, such as frontline nurses, teachers, firefighters, social workers and police constables, living in the capital, revealing stark differences in the amount of income spent on housing costs in London versus other parts of the UK. The analysis reveals that a typical public sector worker in London spends a much higher proportion of their salary on mortgage or rent costs than an equivalent worker outside of London.

As an illustrative example, an entry-level police constable in London on a starting salary of about £37,000 this year spends on average £1,700 pcm – which amounts to more than half of their gross salary – on rent in a borough such as Greenwich, where residents’ median incomes resemble the London median. By contrast, an entry-level police constable living in an area such as West Suffolk – which resembles the UK median – spends 38 per cent of their gross income on rent.

The analysis also reveals that if the same police constable bought a one-bedroom apartment in Greenwich on a five-year fixed mortgage rate of 2 per cent back in 2018, their overall mortgage costs would be 3.5 times higher than a police constable living in West Suffolk with the exact same property type, mortgage rate and loan-to-value ratio. If both individuals were to renew their fixed term mortgages now at the current rate of 6 per cent, the police constable in London would spend just under half of their gross income on mortgage costs over the five year period, whereas the police constable in West Suffolk would spend 21 per cent of their gross income on mortgage costs.

The new analysis shows that public sector recruitment in London is growing at a much slower rate than the national average. Between 2018 and 2022, London lagged behind most UK regions in the growth of its public sector workforce, with employee headcount growing in London by 6.2 per cent, versus 6.9 per cent in the UK and 6.7 per cent in England.

Both the Police Federation and NHS London recently warned of the issues they are facing around recruitment in their sectors, with data from NHS Digital last year revealing that London is suffering the worst NHS staffing crisis in England as vacancies for nurses and general NHS staff are much higher in the capital than in any other region. [1]

City Hall’s data also shows that since 2016, median annual public sector pay in London has grown at a much slower rate (14.9 per cent) than the rest of the UK (15.5 per cent) and London’s private sector (17.4 per cent). These trends signal that the capital is not only struggling to attract much-needed talent into the public sector, but that as wages stagnate and the cost-of-living continues to rise, public sector workers in London are having to pay for more, with significantly less.

A key aspect of the cost-of-living crisis highlighted by the analysis is housing. Despite a rapid increase in council and affordable housebuilding since Sadiq was elected Mayor, years of Government inaction and austerity has meant that London is now facing an acute housing affordability crisis. London continues to be the most expensive place in the UK to buy a home – according to HM Land Registry Data for 2021, the average house price in London was 45 per cent higher than the second most expensive region in the UK (Southeast England). [2]

Recent City Hall research has shown how housing pressures could grow further, forecasting that average private rents in London could soar to upwards of £2700 pcm next year [3], and that more than 200,000 London households could face a mortgage ‘bomb’ next year and be forced to pay an extra £520 per month in mortgage costs [4].

While the Mayor is doing all he can to support Londoners – including building more genuinely affordably homes in the capital than at any point since records began and starting work on additional new council homes than at any time since the 1970s – the scale of the housing crisis is such that it requires swift action from central Government.

The Mayor is reiterating his calls on Government to invest the £4.9bn a year needed to deliver the genuinely affordable housing the capital needs, and to bring in measures to give renters breathing space from runaway rents, starting with a two-year rent freeze.

The Mayor of London, Sadiq Khan, said: “This analysis indicates that the disproportionate and negative impact of the housing crisis on public sector workers in London could have serious knock-on effects for the health of the capital’s public sector in the longer term. 

“It’s not right that public sector workers in London, who provide an invaluable service to us all, are faced with stagnant wages and are having to spend even more of their hard-earned money on housing.

“Unless the Government acts now and provides the £4.9bn a year required to deliver the genuinely affordable housing the capital needs, I fear talented people will not only continue to leave the public sector but avoid joining it in the first place. By ensuring that more Londoners can remain in their city, using their talents to serve, we can help build a better, more prosperous London for all.”

UNISON London regional secretary Jo Galloway said: “With house prices and rent costs higher in London than anywhere else in the UK, public service workers are feeling unbearable pressure.

“Public sector pay simply isn’t rising enough to keep up with the cost-of-living, with many workers forced to leave London to find cheaper housing options, unable to live in the communities that they serve.

“This will do nothing to reduce the already soaring vacancy rates in the NHS and other essential services. The government must do more to tackle this issue and invest in proper affordable housing for all.”

TUC Regional Secretary for London Sam Gurney said: “Public sector workers keep this city running - in our schools, hospitals, emergency services, care homes, councils and across our transport network.

“But after years of Tory-imposed pay cuts and freezes, they have been left brutally exposed to soaring housing costs. 

“It is not right that our key workers are being priced out of the capital and forced to find homes and jobs elsewhere. 

“In the middle of a recruitment and retention crisis in essential services like education, health and social care, London can’t afford to lose any more skilled and experienced staff.

“Everyone deserves a decent standard of living and access to decent, affordable housing. The Mayor is right to highlight this urgent problem."