Building on the diagnosis of urban shrinkage, we examine how two cities in Lusatia are dealing with the challenges of structural change. Adopting the concept of “spaces of possibility” (SoP), we view shrinkage as a dynamic phenomenon that holds both risks and opportunities for urban development and is moderated by local actors, which can lead to conflicts of varying degrees. Using two qualitative case studies in the municipalities of “Rabenfurt” and “Ostenau,” we show that historical backgrounds, established cultures, and patterns of decision‐making are particularly decisive factors in this regard. Rabenfurt represents a top‐down logic with a focus on economic development, which tends to marginalise citizens’ opinions. Ostenau is characterised by a bottom‐up perspective, actively involving local initiatives and citizens in decision‐making processes. However, the created status quo in Ostenau is fragile. The results emphasise that local cultures and modes of decision‐making should be taken into consideration when applying the concept of SoP.