The considerable importance of housing to the urban and national economy contrasts sharply with housing conditions and official policies that exist in many developing countries. For all but the middle- and upper-income groups, housing is usually costly in relation to income and the quality of dwellings available. Cramped, crowded, and unsanitary settlements are the lot of low-income families, conditions that debilitate their energy and reduce national productivity. Families in illegal dwellings constantly face the threat of eviction as well as scarcities of water, sewerage, and transport. Often, under the banner of slum clearance, low-income groups are removed to higher-quality dwellings located far from income-earning opportunities and asked to pay rents they cannot afford. This study is intended to contribute to the discussions of housing policy options among urban planners and policymakers in developing countries. It does not attempt to analyze the optimal allocation of investment in urban areas or to suggest what place housing should have in such investment. There is no argument for a shift of capital and other resources from other sectors into housing. Instead, the principal intention is to achieve a better understanding of the workings of the urban housing market, especially as it affects low-income families, so as to bring about an improved use of the resources already used for housing and to allow new resources to be used effectively.