From the later 1970s through to the end of the military government in Brazil (1985), many social scientists saw signs of a new form of citizenship and a deepening of democracy emerging in favela residents' associations. Some maintained the dream, even as it became clear that the restoration of party politics, pervasive clientelism, and effects of economic globalisation tended to corrode and isolate the associations. Over the decades, however, the dream has been further shattered by studies, mainly of favelas in Rio de Janeiro, which show the associations destroyed or enfeebled in the course of drug wars and the dynamics of ‘the militarisation of urban marginality’ (Loïc Wacquant). This paper reviews several of these studies, and concedes much to them. However, a basis for maintaining the dream is found in a shift of focus from residents' associations in particular favelas to networks and a ‘new institutionality’ in urban politics.