The rapid increase in urbanization, coupled with the rising population, has added to the housing shortage in urban areas. About 25% of the people in large cities live in katchi abadis (shantytowns). The Public Works Department has built more than 8,000 units in Islāmābād, Lahore, Peshāwar, and Quetta at a cost of R 1,588 million. Under the 1986–90 program, the residents in the katchi abadis were to be given proprietary rights. In 1987, the National Housing Authority was created to coordinate the upgrading of the existing katchi abadis and prevent the growth of new ones.

As of 1991, 171 abadis had been renovated at a cost of R 454 million, and 522 more were under development. In 1998, there were 19,211,738 housing units nationwide with an average of 6.8 occupants per unit. About 54.97% of all units had two to four rooms; 38.11% had one room. About 81% of all dwelliings were owner occupied.