Directive No. 165, a new directive from the Chinese central government-specifically, the Department of Construction-requires that 70 % of new residential units be smaller than 90 m2, as of June 1, 2006. The directive raised great concerns after initial confusion and speculation, not only for land developers and consumers but also for urban and transportation planners. The intention of the new policy is clearly targeted to tame ever-rising housing prices and bring affordable housing to average citizens. However, it is questionable whether the policy at its face value can achieve those objectives. The policy's effect on land use, urban form, infrastructure, and eventually the housing market is as yet unknown. This paper focuses on the potential effect of the new housing policy on urban infrastructure, particularly transportation. On the basis of the historical urban development in China, Western experience, and current problems and issues encountered by most large metropolitan areas worldwide, the authors caution that the new housing policy may create an unexpected negative effect on transportation infrastructure and make the already congested roadways in most urban areas in China even worse. Some modifications or relevant strategies are needed to achieve the objective of housing affordability while not sacrificing quality of life. It is suggested that connections be made between housing development and urban infrastructure such as transportation, power, water, and comprehensive land use policies to achieve balanced growth and avoid potential social problems.