Diadema is a small overpopulated municipality in metropolitan São Paulo where urban development fell behind the dramatic population increase stimulated by industrialisation, generating housing and infrastructure deficits, and consequently forcing people to live in sub‐human conditions in the shanty towns that mushroomed around the industrial parks. The region became a melting pot for social movements in the community and in the trades unions. Since the return to democracy in 1982, the municipality has been governed by left‐wing parties with intensive citizen participation in policy elaboration and decisions. This case examines the municipal housing policy from its early days until the present, involving considerable articulation with social movements, and the role played by different community activists from the church and the trades unions.