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This paper is part of a larger dissertation project that interrogates how urban planners dealt with Mexico City’s unprecedented growth over the 1940s and 1950s. Mexico City’s urban explosion constituted a daunting endeavor for a government in charge of providing urban services to millions—it also represented a political and a cultural challenge as the city changed not only in size but also character. Accordingly, this paper studies Mexico City’s housing crisis and how it destabilized traditional geographies of poverty and marginality. It focuses on housing policies undertaken by the Banco Nacional Hipotecario y de Obras Públicas and its succesor, the Instituto Nacional de la Vivienda. I compare and contrast two technical, juridical, and cultural representations of the problem of urban poverty: the “herradura de tugurios”—horseshoe of inner city slums—on the one hand, and the “colonias proletarias”—peripheral proletarian neighborhoods—on the other. While inner-city slums had a long history of prejudice and attempts at reform, irregular colonias proletarias, the product of massive rural-urban migration over the 1930s and 1940s, were a new and ambivalent phenomenon. Initially regarded as a problem, colonias proletarias ended up becoming a solution to the city’s housing shortage. This change in perceptions and policies represented an adaptation of the transnational language of architecture and urban planning, keen on pushing for different patterns of suburbanization. Colonias proletarias therefore offer a vantage point for understanding how Mexico City’s government dealt with the political and technical problem of organizing the urban poor in a rapidly growing city.