In many cities, there has been renewed interest over the last 30 years in densification as part of wider efforts to combat urban sprawl. In daily practice, however, densification is a contested process because of its redistributive effects. Next to potential environmental advantages, it produces both benefits and losses for different individuals and households. The redistributive effects are an expression of conflicts between environmental, economic, and social dimensions of sustainability. We show that the latter is heavily impacted: if densification projects are not designed to the needs of people who are actually supposed to benefit from it—the residents—low-income groups are at risk of social displacement. This scenario is highly unsustainable. By using a neo-institutional approach and comparative case study methodology conducted in Switzerland, we analyze the institutional rules and the involved actors’ strategies when dealing with densification projects. We explain the mechanisms leading to the loss of social qualities when competing with economic interests of investors and authorities.