This study aimed to explore the role of dwelling conditions and neighbourhood characteristics in explaining the frequently observed association between housing tenure and health. A postal questionnaire, focusing on a number of specific aspects of the home and the area, was sent to a random sample of adults in the west of Scotland (achieved sample size 2867, response rate 50%). The health measures were limiting long-standing illness, self-assessed health, recent symptoms, and anxiety and depression. Having controlled for age, sex, and marital status, housing tenure explained, respectively, 2.7%, 5.4%, 3.9%, 2.4% and 5.4% of the variance in these variables. These percentages were reduced by between 93% (for anxiety) and 73% (for self-assessed health) when housing problems, housing fixtures, overcrowding, dwelling type, access to garden, area type and area amenities were introduced into the model. This suggests that features of the dwelling and its surroundings help to explain observed associations between tenure and health in the UK, and that housing and area problems may be particularly important. Housing improvements and urban regeneration may help to reduce the health gap between housing tenures, and more generally to reduce inequalities in health.