Abstract: Generally, the renewal of old residential areas in small and medium cities is progressing slowly and it is difficult to control the capacity. The key difficulty lies in the increasing cost of demolition and resettlement. The current mode is to include the demolition and resettlement expenses into the land cost. In order to balance the interests, it is common to improve the plot ratio of the project, which is the root cause of repeatedly breaking through the plot ratio of the control rules. Based on the new idea of overall coordination, this paper puts forward the allocation mechanism of resettlement cost of demolition and relocation, and changes the calculation of resettlement cost from the project demolished area to the overall allocation of built-up area, so as to construct a new mechanism of regulating and controlling the capacity of old residential areas. This mode shift is particularly applicable to towns at and below the county level, and is easier to manage as a whole.