The Shunned House of the title is based on an actual house in Providence, Rhode Island, built around 1763 and still standing at 135 Benefit Street. Lovecraft was familiar with the house because his aunt Lillian Clark lived there in 1919-20 as a companion to Mrs. H. C. Babbit. However, it was another house in Elizabeth, New Jersey that actually compelled Lovecraft to write the story. As he wrote in a letter:
On the northeast corner of Bridge Street and Elizabeth Avenue is a terrible old house—a hellish place where night-black deeds must have been done in the early seventeen-hundreds—with a blackish unpainted surface, unnaturally steep roof, and an outside flight of stairs leading to the second story, suffocatingly embowered in a tangle of ivy so dense that one cannot but imagine it accursed or corpse-fed. It reminded me of the Babbit House in Benefit Street…. Later its image came up again with renewed vividness, finally causing me to write a new horror story with its scene in Providence and with the Babbit House as its basis.
For many years, the narrator and his uncle, Dr. Elihu Whipple, have nurtured a fascination with an old abandoned house on Benefit Street. Dr. Whipple has made extensive records tracking the mysterious, yet apparently coincidental, sickness and death of many who have lived in the house for over one hundred years. They are also puzzled by the strange weeds growing in the yard, as well as an unexplained foul smell and whitish phosphorescent fungi growing in the cellar. There, the narrator discovers a strange, yellowish vapor in the basement, which seems to be coupled with a moldy outline of a huddled human form on the floor. The narrator and his uncle decide to spend the night in the house, investigating the possibility of some supernatural force.