Sydney's skyrocketing housing market has forced nurses, teachers and emergency workers to abandon the city or "live in cupboards" putting hospitals and schools at risk of staff shortages.

A University of Sydney report, released on Monday, shows Sydney lost close to 20 per cent of key workers including teachers, nurses and emergency service workers to outer and regional areas from 2006 to 2016.

Key workers can't afford to buy a home in Sydney's inner-city suburbs while a nurse with five years experience who earns about $57,000 can only afford to buy a home in Cessnock, about 100 kilometres from Sydney, the report found.

Schools in the city's northern beaches and eastern suburbs, once popular regions for teachers to live, may soon struggle to fill critical casual and temporary positions, NSW Teachers Federation general secretary John Dixon warns.

Teachers once battled a lack of public transport to commute to the job-rich western suburbs, but now that trend has reversed.

"Now they live in the west and it would take them two to three hours to commute to the east before school opens," he told AAP.

"And casual and temporary teachers hold up half the sky."

Mr Dixon said people were increasingly moving to regional centres like Newcastle and Wollongong and teachers were following.

With buying a house in Sydney out of the question for many teachers, they have become reliant on living with family members or in share-houses, Mr Dixon said, adding that even finding suitable rental properties was proving a struggle.

"Many teachers are just living in cupboards," Mr Dixon said.

One of Sydney's nurse educators, who asked to be identified as Sarah, lives in a cramped and dilapidated apartment in the inner west, so she can commute to work and support her daughters, who are about to start university.

"I worked so hard, studied so hard to get to my dream position, and I'm being told I have to drive two hours or quit my job," she told AAP on Monday, adding that nurse educator jobs are uncommon in regional areas.

The single mother aged in her 50s tried to get a bank loan, but was told by a mortgage broker she had been priced out of Sydney entirely.

"It's soul destroying," she said.

To make matters worse she was offered below-market rent by her landlord on the condition he didn't have to do any repairs, she said.

Sarah said her story, though depressing, is typical.

She says the state's hospitals will have to prepare for a shortage of nursing staff as young people move interstate, overseas or change careers.

A NSW Treasury briefing note from late 2016 warned the housing affordability crisis could hurt business which would have to lift wages to cover increasing living costs.

It also said a fall in home ownership could lead to greater welfare dependency for older residents.