This paper considers the housing conditions inherited by the new government in South Africa and the challenge they present. It draws on primary and secondary sources, and on interviews with some of the key actors involved in housing policy. It examines contemporary housing conditions, and the colonial and apartheid legacy which largely created them. It goes on to consider the implications of the struggle under apartheid for improvements in living conditions, and to review developments in housing policy in the 1980s and early 1990s. The policies emerging from the first year of the new government are described, and the implementation of policy in the first two years is reviewed. Issues that arise are discussed, and the conditions required for the state, market and civil society to play their part in achieving the objectives of housing policy are considered.