The poorest and most marginalized people in cities are often understood to be those living in the worst forms of shelter or with none at all. They are labelled the "homeless", the "destitute" and the "extreme poor". Based on ethnographic research in Dhaka, Bangladesh, this article challenges this association, arguing that living in the worst conditions can enable people to earn, save, and invest in lives and livelihoods elsewhere. Their capacity to do so is generally related to the urban potential for creating "defiled surpluses", resources that can be productively exploited but at the cost of an association with the defiled. These costs and opportunities are not however equally distributed, and recognizing this helps us to understand the nature of micro-inequalities. In Dhaka the presence of people living on pavements and in markets, parks and transport terminals can represent destitution, but also the astute negotiation of the city.