BACKGROUND: The purpose of this review was to evaluate the available research on the quality and costs of dispersed community-based housing when compared with clustered housing. METHODS: Searches against specified criteria yielded 19 papers based on 10 studies presenting data comparing dispersed housing with some kind of clustered housing (village communities, residential campuses, or clusters of houses). The studies reported the experience of nearly 2,500 people from four different countries. RESULTS: In five of eight quality of life domains there were no studies reporting benefits of clustered settings. In respect of interpersonal relations, emotional, and physical well-being, clustered settings had some advantages. However, in many of these cases the better results refer only to village communities and not to campus housing or clustered housing. In terms of costs, clustered housing was usually less expensive because of lower staffing levels. In two of the three studies that examined costs controlling for user characteristics, there was no statistically significant difference. CONCLUSION: Dispersed housing appears to be superior to clustered housing on the majority of quality indicators studied. The only exception to this is that village communities for people with less severe disabilities have some benefits; this is not, however, a model which can be feasibly provided for everyone. Clustered housing is usually less expensive than dispersed housing but this is because it provides fewer staff hours per person. There is no evidence that clustered housing can deliver the same quality of life as dispersed housing at a lower cost.