In the last few decades, many governments have implemented urban restructuring programmes with the main goal of combating a variety of socioeconomic problems in deprived neighbourhoods. The main instrument of restructuring has been housing diversification and tenure mixing. The demolition of low-quality (social) housing and the construction of owner-occupied or private rented dwellings was expected to change the population composition of deprived neighbourhoods through the in-migration of middle- and high-income households. Many studies have been critical with regard to the success of such policies in actually upgrading neighbourhoods. Using data from the 31 largest Dutch cities for the 1999 to 2013 period, this study contributes to the literature by investigating the effects of large-scale demolition and new construction on neighborhood income developments on a low spatial scale. We use propensity score matching to isolate the direct effects of policy by comparing restructured neighbourhoods with a set of control neighbourhoods with low demolition rates, but with similar socioeconomic characteristics. The results indicate that large-scale demolition leads to socioeconomic upgrading of deprived neighbourhoods as a result of attracting and maintaining middle- and high-income households. We find no evidence of spillover effects to nearby neighbourhoods, suggesting that physical restructuring only has very local effects. Many European and North American governments have a long tradition of urban restructuring programmes to regenerate deprived neighbourhoods. The combination of low-quality housing and a variety of socioeconomic problems, such as high crime rates and high unemployment rates, was thought to negatively affect the larger urban area and its residents. On the city level, concentrations of poverty were considered to be detrimental to the economic prosperity of urban regions by reducing the attractiveness of the area to businesses and higher income groups.