Compact city policies have become planning orthodoxy over the past three decades. But compact city development takes many forms, and the compact city concept often obscures a diverse range of social, economic and environmental outcomes of urban densification. In Australia the compact city agenda has primarily taken the form of market-led urban renewal, facilitated by different layers of government. As a result, the principal driver of urban change is speculative property investment. In Sydney, where around 70% of new development is multi-unit dwellings, the alignment of housing need with housing outcomes has increasingly been lost. Demand is driven by investors, whose preferred product attributes often do not align with those of residents. This speculative activity also underlies the dramatic rise in housing unaffordability across Sydney. Clearly, the compact city agenda is having a disproportionate impact across our society, with lower-income and disadvantaged residents most severely affected. For the most part, however, public and policy debates have so far failed to properly acknowledge or ameliorate the particular impact of this model on these residents. This paper addresses this question by identifying (i) how high density living is different; and (ii) how the current compact city model makes lower-income and disadvantaged residents especially vulnerable. It does so by drawing on the findings of a research project undertaken for Shelter NSW, including analysis of census data and a workshop with a diverse group of urban policy-makers and housing sector stakeholders.