The complexities of contemporary planning, the urgent need for affordable housing and increasing demands for sustainable development are pushing current housing provision practices to their limits. In response, more collaborative housing approaches have (re)gained prominence in recent decades, offering diverse sustainability potentials. This paper explores the framing of sustainability within European and US literature on collaborative housing while contrasting the perceived sustainability potential with practical implementation challenges. Approached through a systematic sample of selected literature, the socio-economic and environmental sustainability claims associated with collaborative housing are explored. This analysis outlines identified knowledge gaps, financial hurdles, and political challenges, offering insights into the emerging discourse on structural support for collaborative housing models. The findings indicate an absence of substantiated support for the sustainability claims made, emphasising a reliance on individual case studies. Furthermore, a disparity emerges between the potential of sustainable collaborative housing and the current policy environment’s capacity to facilitate their realisation. This research underscores the urgency of strengthening empirical foundations and aligning policies and instruments to bridge the gap between sustainability aspirations and the realities of the housing sector.