Discussed are current practices and promising approaches in the development of community-based living arrangements for children and adults with psychiatric or developmental disabilities. Problems with current systems include a lack of safe, affordable housing; lack of consumer choice; inflexibility; lack of a coherent, clear ideology; failure to address deep human needs; and the concept of a continuum of services. Promising approaches that have been identified in the area of residential services for individuals with developmental disabilities include family support services, permanency planning, and individualized living alternatives for adults. Promising approaches in the mental health field also focus on family supports and permanency planning, in addition to emphasizing an individualized, psychiatric rehabilitation approach to housing. Legislative and regulatory barriers to implementation of individualized approaches involve funding mechanisms which are tied to facility types or to the individual's level of functioning based on assessment. (JDD)