Conventional policies of urban poverty alleviation have proven to be largely ineffective. They have, in particular, failed to defuse the worsening housing crisis in the large cities of the developing world. Shortcomings in funding and implementation notwithstanding, the Philippine «Community Mortgage Program» represents a promising paradigm shift. It allows squatter associations to acquire land by means of state-guaranteed credit which is to be repaid over a period of 25 years. The resulting installments are well below the rent for a single room in the same area, and thus acceptable to most residents. The CMP is thus effectively addressing one of the crucial problems of squatters, namely precarious access to urban land and insecurity of tenure. The results of our studies in Manila and Cebu City, however, indicate that the program always excludes a substantial part of the community members, among them the dire poor. The unintended consequence is a division of communities which often turns into violent conflicts.