This paper examines the implications of varying housing needs for the design and targeting of housing programs and discusses policy issues raised by targeting options. Data from the American Housing Survey are used to identify housing problems in 1989 for all households and to track changes in problems between 1978 and 1989 for lower income renters and owners. Relative needs for rental assistance are evaluated for different types of households, including families with children and the elderly, and for various income groups. The paper then contrasts the housing situations of low- and middle-income renters to appraise programs for first-time home buyers. This assessment of the incidence and severity of housing problems demonstrates that the very poorest renters have by far the most pervasive and serious problems. Families with children are particularly disadvantaged. Therefore, recent changes that dilute past targeting of rental assistance at renters with "worst-case needs" should be reexamined, and both rental and homeownership programs should be better directed at lower income families with children.