Child poverty is an increasing challenge for Norwegian society and its municipalities. Policies to reduce it include housing as one particularly important health determinant. The capability approach allows us to focus on determinants for health. Methods were triangulated and literature and document studies, interviews and participating observations were part of the data-gathering process. Thematic analyses were used to analyse data. Children and adults view housing as important. Housing determines families’ possibilities of consuming other goods and choosing what functionings they will convert their resources into. Municipalities can change the course of development by engaging with the Norwegian Government Housing Bank and implementing instruments such as social housing, housing allowances and starter loans giving families the possibility to become homeowners. Housing determines intra- as well as inter-generational life chances. Housing is a corrosive functioning if children live in families that have low-quality housing or high housing costs. Housing is a positive functioning for children if families own their housing. Housing is defined as a market good and a welfare asset. Policies enable some families to buy their own housing, whereas the number of poor children still increases.