A cottage hospital built with donations from Carshalton residents after World War I may now be sold to housing developers for £2.1m.
The NHS has stunned local people by proposing the sale of the popular War Memorial Hospital site in Carshalton Park.
Sutton and Merton Primary Care Trust (PCT) previously gave assurances that the decaying building would provide intermediate care after its closure in 2005.
Sutton Councillor Paul Scully, the Conservative leader, is accusing trust bosses of delivering "hollow promises" to the community.
He said: "For years, residents and ward councillors were promised faithfully that the land would be used for healthcare and that their fears it would be re-developed were unfounded."
"As we come close to the 90th anniversary of the end of the First World War, it is disappointing to think that a healthcare site built through public subscription might be replaced as a memorial to the fallen by modern housing."
The PCT said increased home-care provision meant convalescing patients could be treated away from fully-equipped hospitals. Sutton residents can still access intermediate care beds at Wilson Hospital in Mitcham.
A spokesman added: "It would not be sensible to open another unit of a similar size. However, we may well use part of the Carshalton site for modern housing for people with learning disabilities, which would retain the health use Coun Scully is looking for.
"He is right to give credit to those who donated their own money during the First World War to build Carshalton.
"Today the PCT has the same ambition – to provide the very best care for local people in all appropriate settings, including at hospitals and our new local care centres."