Pakistan is facing an unprecedented urban housing crisis, with low-income, low-rise settlements rapidly transforming into high-density informal areas, exacerbating physical, social, and environmental issues. At the same time, speculative, low-density elite housing is encroaching on the city’s ecological resources. This paper examines the factors driving the crisis and suggests policy actions to mitigate it, including land acquisition for low-income settlements, controlling land speculation, enforcing minimum density standards, and providing affordable credit for housing improvements. It also calls for establishing appropriate housing standards, offering technical advice for both informal and formal densification, and conducting further research to understand the dynamics of this evolving issue.