Substandard and insecure housing conditions are recognized as a crucial aspect of urban poverty. In most large cities in the developing world, the formal market serves only a minority of the population. It is estimated that between 30 and 70 % live in 'irregular' settlements and that up to 85 % of the new housing stock is produced in an extra-legal manner, with severe social and environmental consequences. John Turner's groundbreaking work and the first Habitat conference in Vancouver 1976 became markers of a paradigm shift towards an enabling and participatory approach to housing provision. However, little progress has been made in translating the new paradigm into practical and sustainable policies. Relocation schemes, social housing, slum upgrading, and sites and services are beset by two related problems: They are far too small-scale to serve the growing demand, and products are far too expensive to be affordable for low-income groups. The paper claims that the informal sector's strategy of incremental development and improvement of housing and infrastructure can be incorporated into public policies, and introduces cases from the Philippines and Pakistan as good practices in this direction.