During the conflict of the past two and a half decades the social and economic infrastructure of Afghanistan was virtually destroyed. About six million Afghans left the country, mainly for Pakistan and the Islamic Republic of Iran. Many of those who returned found their houses destroyed and their land under new ownership, having illegally changed hands many times. Most cities in Afghanistan now face acute housing shortages, with returnees living in inhuman conditions. In the informal settlements of Kabul two-thirds of houses are occupied by more than one family, and almost 9 of 10 families live in just one or two rooms. To alleviate the severe housing shortage will require concerted actions by the government, the private sector, donors, and stakeholders. The World Bank estimates that in Kabul alone investment of $2.44 billion will be needed for rehabilitation and new construction. Efforts to develop the housing sector need to focus on several challenges: resolving legal issues relating to land ownership, tenure, and transfer; creating a legal framework and necessary infrastructure for the housing market; broadening access to finance and developing the mortgage market; and extending microfinance loans to cover housing for lowincome groups.