Neighborhoods with poor-quality housing, few resources, and unsafe conditions impose stress, which can lead to depression. The stress imposed by adverse neighborhoods increases depression above and beyond the effects of the individual's own personal stressors, such as poverty and negative events within the family or workplace. Furthermore, adverse neighborhoods appear to intensify the harmful impact of personal stressors and interfere with the formation of bonds between people, again increasing risk for depression. Neighborhoods do not affect all people in the same way. People with different personality characteristics adjust in different ways to challenging neighborhoods. As a field, psychology should pay more attention to the impact of contextual factors such as neighborhoods. Neighborhood-level mental health problems should be addressed at the neighborhood level. Public housing policies that contribute to the concentration of poverty should be avoided and research should be conducted on the most effective ways to mobilize neighborhood residents to meet common goals and improve the context in which they live.