The emergence of the Shushtar New Town housing project in 1977, designed by Iranian architect Kamran Diba, raised a great hope among contemporary Iranian architects and authorities. Diba’s design offered an alternative approach that stood against the existing housing issues and challenges caused by the government’s radical housing ideology, and the universalisation of Western lifestyle values. Yet, even while Diba’s Shushtar social housing project was receiving worldwide architecture awards, signs of erosion were gradually emerging in the project. Today, just a few parts of the original design remain unchanged, while the rest have been demolished or transformed by its residents. As a result, critics and historians were left with a number of questions: why should such an allegedly great pioneer project suddenly become one of the most prominent architectural loopholes in the housing history of Iran? What were the accountable design components of social housing that Diba failed to address? And how could the Shushtar New Town experience contribute to more general social housing discourses? These questions will be addressed through literature review, documentary research, observation, and descriptive data analysis.