The demand for living space is rising in growing cities. To restrict urban expansion in the outskirts, a common strategy is to densify existing neighbourhoods. Densification implies the increase of water impervious area which increases the vulnerability to flooding during extreme precipitation events. Sustainable urban drainage systems are considered as a strategy to handle stormwater runoff locally and thus relieve the sewage system. This study investigates the combined quantitative hydrological impact of densification and sustainable stormwater management measures in a residential neighbourhood in Munich, Germany. The living-lab approach pursues the application of nature-based solutions in a real planning case to achieve positive climate effects while densifying the neighbourhood. The study is based on single event simulations of three return periods with the physically based software PCSWMM. The events are implemented for both current and climate change precipitation intensities of the RCP 8.5 projection for 2040–2069. Three scenarios are implemented: a status quo, a business as usual scenario (additional buildings without compensation measures) and a best-case scenario (one additional floor with green roofs disconnected from the sewers in combination with rain gardens and porous pavements on the land parcels). The comparison between the different scenarios focuses on three main aspects of the water balance, namely, infiltration, runoff and storage. The results show that measures for sustainable stormwater management are crucial elements to cope with an increasing number of heavy precipitation events due to climate change. The best-case scenario significantly outperforms the other two concerning water infiltration, surface runoff and storage. Most notably is the impact of climate change projection rainfall intensities for 2040–2069. The outcomes for these intensities clearly show the positive impact of sustainable water-sensitive design. The results demonstrate that it is in fact possible to enhance the water balance and gain new living space simultaneously if a sustainable urban planning strategy is implemented that includes future-oriented stormwater management.