Objective: Informal settlements in Iranian metropolises, despite their numerous problems, possess hidden capacities that deficit-based approaches overlook. This study aims to assess livability in informal settlements of Mashhad by identifying these hidden capacities.

Methods: A mixed-method approach (quantitative-qualitative) was adopted. Quantitatively, 420 questionnaires were distributed across eight zones of informal settlements in Mashhad (content validity: confirmed by experts; reliability: Cronbach's alpha = 0.935). Data were analyzed using Kolmogorov-Smirnov, Pearson correlation, stepwise regression, and structural equation modeling. Qualitatively, 40 semi-structured interviews were conducted with key residents and analyzed using thematic analysis (three coding stages: open, axial, selective).

Findings: The mean total livability was significantly below the average level, while the mean total hidden capacities was significantly above the average level (p < 0.001). Social hidden capacities had the strongest impact on livability (particularly the social dimension), whereas the environmental dimension showed the weakest influence. The moderating variable (neighborhood contextual characteristics) significantly increased the explanatory power of the model. Thematic analysis revealed four overarching themes: "hidden networks of mutual aid and survival," "resistance economy and invisible occupations," "physical flexibility and indigenous construction knowledge," and "institutional hopelessness and local claim-making." Among the neighborhoods, Jadeh-e Qadim-e Quchan exhibited the highest livability level, while Golshahr exhibited the lowest.

Conclusion: Informal settlements in Mashhad possess considerable hidden capacities that can serve as a basis for an asset-based approach. However, deprivation alone does not lead to the development of these capacities; incomplete and repeated urban interventions, by creating institutional hopelessness, erode social capital and weaken hidden capacities. Strengthening existing social networks, supporting the informal economy, and avoiding unfinished urban projects are recommended.