This paper documents the process and outcomes of a two-year effort at the University to research, design, and build innovative affordable housing. Issues explored in the paper include developing design through research, testing the design through actual construction, applying lessons learned to future projects, and disseminating knowledge into practice. The broad objective of this research is the design and construction of affordable, healthy, socially and culturally appropriate, energy efficient, attractive and sustainable housing. The interdisciplinary team included architects, architecture faculty, contractors and researchers with expertise in design, social and cultural factors, and sustainable building technology. The project is done in collaboration with a local non- profit organization and community development corporation. Phase one of the project was the design and construction of a 996 square-foot (92.5 square-meters) affordable house utilizing innovative construction and enveloping systems. The engineered wood structural system being tested combines un-insulated 11/8-inch (3.8 cm) OSB structural engineered wall panels (oriented strand board) with I-joist floor and roof framing diaphragms. This structural system was combined with the PERSIST (Pressure Equalized Rain Screen Insulated Structure Technique) system of self- healing waterproof membranes adhered to the panel and sheathed by 3” rigid insulating sheets to create a weather tight thermal envelope. One intent of these systems is to reduce material and construction costs by minimizing and eliminating construction steps, such as applying rigid insulation board with embedded furring strips or the direct application of finishes to the panel. Additional intentions are to improve energy efficiency and indoor air quality by increased air tightness and inhibiting mold growth due to moisture infiltration, which has become common in tightly sealed conventional residential construction in the United States. A target cost of $85,000 (US) or less for construction was established. Phase Two of the project focuses on further development, testing, and evaluation of the design, technologies, and production of two successive Case Study Houses, each bringing forward lessons from the previous case studies. House Two has been completed and House Three will break ground for construction in December 2004. Continuing research efforts include on-site evaluation of construction management, documentation by video and photography and comparison between baseline conventional construction and the PERSIST system applied to the structural engineered panel. This paper will discuss the research project’s documentation and critiques and the relative successes of applying lessons learned that modified each successive house in the following areas; energy performance, construction performance and staging, contractor training, interactive education and community input.