Anna Tibaijuka, Executive Director of UN-HABITAT said that the crisis should be viewed as a “housing finance crisis” in which the poorest of poor were left to fend for themselves.

"Clearly you cannot have a harmonious society if people are not secure in their homes," she told reporters at news conference to launch of the State of the World Cities 2008/2009, a flagship report published every two years by the UN agency.

"The financial crisis we are facing today cannot be seen as an event -- it is a process that has been building up over time and this process now has bust." She said governments had to provide cheaper homes for those on lower incomes because the supply of affordable housing could not be left entirely to the market.

The UN-HABITAT said income distribution (measured through Gini coefficient levels) varies considerably among less-developed regions with the divide most noticeable in African and Latin American cities. In both regions, the gulf is often extreme compared to Europe and Asia, where urban inequality levels are relatively low.

Major U.S. cities including New York, Washington, Atlanta and New Orleans have levels of economic inequality that rival cities in Africa. The authors of the study find that though the cities in the United States of America have relatively lower levels of poverty than many other cities in the developed world, their levels of income inequality are quite high. In the United States and Canada one of the key factors in determining levels of economic inequality is race, the report said.

South African cities top the list of the world’s most unqual cities, followed by Brazil, Colombia, Argentina, Chile, Ecuador, Guatemala and Mexico. Urban inequalities in this highly unequal region are not only increasing, but are becoming more entrenched, which suggests that failures in wealth distribution are largely the result of structural or systemic flaws.

Mrs. Tibaijuka said the proportion of people living in slum conditions in wealthy countries could rise because of the credit crunch. With 1 billion people already living in slums at the dawn of the new urban era, the report warned of unrest should governments fail to tackle the urban poverty crisis more seriously.

"I would not be surprised that, if we did another global survey on people living in slum conditions without security of tenure, this number will have increased in developed countries as a result of this crisis," she said referring to a recipe for riots and social upheaval to which the financial turmoil might lead.

"I am not surprised that world leaders are now seizing on the matter because without leadership, without governance, it is a clear test of social tensions," she said.