Concentrated urban development in capital cities is associated with negative effects. Simultaneously, less favourably located cities suffer from population loss and economic decline. Shrinking cities face a loss of urban functions such as public infrastructure, high-quality services and various aspects of urban living; the cultural heritage is also degraded through declining population and vacant buildings. The end result is a lower level of attractiveness and competitiveness along with negative development prospects. At the same time, booming cities and city regions face negative agglomeration externalities such as rising real estate prices and rents, traffic congestion, land use conflicts or poor environmental quality. One such shrunk town is Görlitz in Eastern Germany, where a new decision support tool to foster urban regeneration and heritage preservation has been tested—the Urban Transformation Matrix. This tool aims at revitalising the historic building stock protected by heritage preservation law. The idea is to openly discuss structural alterations to buildings in order to foster revitalisation and high-quality occupancy not only in the case of individual buildings, but also in the wider neighbourhood context, which in turn can promote further revitalisation and revaluation of the entire urban district. The Matrix takes into account both heritage aspects and the proposed post-refurbishment function of a building before launching the approval procedure for the construction work. Based on scientific monitoring, the article reflects the heated discussions around the Urban Transformation Matrix and the test-period of its application, as well as factors of successful implementation.