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Throughout the last two decades, large housing estates in eastern Germany have become the scene of an increased concentration of low-income households. At the same time, considerable shifts in the structure of home ownership have been documented in these areas. National and international investors have acquired large housing stocks here and become a fundamental part of the local housing markets. This paper discusses the connection between both developments. Based on a case study in two large housing estates in Halle (Saale) and Schwerin, it is argued that the relative impoverishment of large housing estates can be traced back to two developments on the supply side: On the one hand, municipal housing companies are increasingly made responsible for the provision of homes for households that cannot provide for themselves on the market. Due to the uneven spatial distribution of municipal housing, this leads to an increased concentration of poor households in the large housing estates. On the other hand, letting policies of financial investors are characterised by tight yield requirements. In view of a rather restrained demand for the housing they manage, they therefore increasingly rent their flats to population groups that are avoided by other landlords. Together, these developments operate like a 'segregationmachine', which continuously shifts low-income population groups to the large housing estates. [ABSTRACT FROM AUTHOR]