While much of the literature on hybridity has emanated from Europe and North America, hybrid organisations can be found in many other countries which have qualitatively different welfare regimes (Esping-Andersen, 1990) and in which the respective roles of government, market and civil society (including both third sector organisations and family) may vary enormously (Hill, 2006). This chapter focuses on Australia where scholarship has been concerned primarily with the relationship between the third sector and government since governments began to contract out human services from the late 1980s (Considine, 2001; Lyons, 2001). In addition, there is growing interest in ideas around social enterprise, combining elements of third sector and market (Barraket and Collyer, 2010). Within this literature, however, there has been very little focus on what sorts of housing third sector organisations (HTSOs) are developing in an era in which Australian governments have decreased their direct involvement in social housing, and people in need of assistance with their housing turn increasingly to families, third sector organisations and the market. The aim of this chapter, therefore, is to apply contemporary thinking about hybrid organisations to understand the development and organisational dynamics of the Australian housing third sector. It examines how a particular set of state, market and third sector influences, combined with the Australian housing third sector’s history and organisational dynamics, have circumscribed the growth and potential social contribution of HTSOs in Australia. The chapter provides a worked example of the challenges faced by some of the larger HTSOs as they have become a distinctive group of hybrid organisations that combine elements of the public and private sectors with those of third sector organisations. We argue that this is a case of ‘fragile hybridity’ in which competing internal logics within broader political and market contexts can either constrain or enable innovation and scaling up of hybrid organisational models.