The paper examines the role that urban finance can play in returning Latin America economies to stability and growth. It argues that one prominent benefit of better urban finance will be to reduce the diffuse but ultimately very regressive effects of current policies. The argument is presented in three sections. First, the paper outlines the postdepression context in which new urban finance policies must be implemented. The second section discusses what the authors consider mistaken perspectives about the nature and role of the urban sector in the economy, focusing on the potential quality of urban assets as collateral in financing the sector and on the effect that this quality can have on the choice of policies. The final section contains proposals to eliminate the destabilizing effects of many public programs using examples from housing finance policies.