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A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand.Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.

In 1986 the World Bank prepared a strategy for low-income housing in developing countries. This work grew out of the Bank's efforts to support the urban poor through an extensive housing assistance program that was launched by Bank President McNamara's speech on urban poverty. By that time, the Bank had provided more than $4 billion of such assistance, and had undertaken an extensive research effort to design support for that lending. Much has changed since that time, not only in the way the Bank provides shelter assistance, more than doubling its support since that review, but also in the changing consensus as to what shelter strategy should be. The authors review the emerging consensus. They examine three new research areas: the empirical analysis of the effects policy has on housing supply; the richer understanding of the effects that land market regulations have on specific projects and on the functioning of urban areas; and the alleged mysterious effects that de Soto, for example, claims that effective property rights have not only for shelter policy but for development more generally. The authors also examine the emergence of both a new financial innovation, micro-enterprise finance, and the increased emphasis given to project design based on community participation, showing how these approaches more fully reconcile the incentives faced by beneficiaries and donors. In sum, the authors argue that the evolving consensus on shelter strategy is not nearly as mysterious as some would claim. Housing markets in most developing countries remain highly idiosyncratic and constrained. Nevertheless, the evolving consensus on shelter strategy appears to recognize these idiosyncrasies and policy constraints as evidenced by the strong and improving performance of the Bank's shelter lending.