This paper articulates the housing policy of the World Bank as it has evolved during the 1980s and early 1990s and proposes a number of important new policy directions for both the Bank and its borrowers. It advocates the reform of government policies, institutions, and regulations to enable housing markets to work more efficiently, and a move away from the limited, project-based support of public agencies engaged in the production and financing of housing.

While the paper endorses many of the policies that have been supported in the first two decades of Bank-financed housing projects, especially the necessity of adopting appropriate standards for housing and residential infrastructure and appropriate pricing and cost recovery, it suggests that these policies by themselves are not enough. Although many elements of an enabling strategy have been present in the Bank’s approach to housing, increased emphasis on treating the housing sector as a whole is needed. In addition, past policies which have emphasized investments in residential infrastructure and housing finance must be complemented with policies that emphasize the need to rationalize the broad regulatory framework within which the sector operates.