diff --git a/src/lang/extra/english.txt b/src/lang/extra/english.txt
index 3cc0b2661f..a6a06d8e70 100644
--- a/src/lang/extra/english.txt
+++ b/src/lang/extra/english.txt
@@ -706,6 +706,9 @@ STR_CONFIG_SETTING_NO_EXPIRE_OBJECTS_AFTER_ZERO                 :Off
 STR_CONFIG_SETTING_IGNORE_OBJECT_INTRO_DATES                    :Ignore object introduction dates: {STRING2}
 STR_CONFIG_SETTING_IGNORE_OBJECT_INTRO_DATES_HELPTEXT           :Set whether players are allowed to build objects before their introduction date.{}Does not apply to objects constructed during map generation.
 
+STR_CONFIG_SETTING_ALLOW_CONVERT_TOWN_ROAD_NO_HOUSES            :Allow converting town roads to non-house types: {STRING2}
+STR_CONFIG_SETTING_ALLOW_CONVERT_TOWN_ROAD_NO_HOUSES_HELPTEXT   :Whether to allow players to convert town-owned roads to a road type which does not allow houses.{}This is off by default because doing so can prevent towns from building houses at all, resulting in them shrinking.
+
 STR_PURCHASE_LAND_PERMITTED_NO                                  :No
 STR_PURCHASE_LAND_PERMITTED_SINGLE                              :Yes, 1 tile at a time
 STR_PURCHASE_LAND_PERMITTED_AREA                                :Yes, large areas at a time
diff --git a/src/road_cmd.cpp b/src/road_cmd.cpp
index 2d76ea5819..6863a74751 100644
--- a/src/road_cmd.cpp
+++ b/src/road_cmd.cpp
@@ -3117,8 +3117,9 @@ CommandCost CmdConvertRoad(TileIndex tile, DoCommandFlag flags, uint32 p1, uint3
 			}
 		}
 
-		/* Disallow converting town roads to types which do not allow houses */
-		if (rtt == RTT_ROAD && owner == OWNER_TOWN && HasBit(GetRoadTypeInfo(to_type)->flags, ROTF_NO_HOUSES)) {
+		/* Disallow converting town roads to types which do not allow houses, unless this is allowed */
+		if (rtt == RTT_ROAD && owner == OWNER_TOWN && HasBit(GetRoadTypeInfo(to_type)->flags, ROTF_NO_HOUSES)
+				&& !_settings_game.construction.convert_town_road_no_houses) {
 			error.MakeError(STR_ERROR_OWNED_BY);
 			GetNameOfOwner(OWNER_TOWN, tile);
 			continue;
diff --git a/src/settings_gui.cpp b/src/settings_gui.cpp
index bae6eb40fc..6e0ea281c0 100644
--- a/src/settings_gui.cpp
+++ b/src/settings_gui.cpp
@@ -2296,6 +2296,7 @@ static SettingsContainer &GetSettingsTree()
 			limitations->Add(new SettingEntry("station.distant_join_stations"));
 			limitations->Add(new SettingEntry("construction.road_stop_on_town_road"));
 			limitations->Add(new SettingEntry("construction.road_stop_on_competitor_road"));
+			limitations->Add(new SettingEntry("construction.convert_town_road_no_houses"));
 			limitations->Add(new SettingEntry("vehicle.disable_elrails"));
 			limitations->Add(new SettingEntry("construction.maximum_signal_evaluations"));
 			limitations->Add(new SettingEntry("construction.enable_build_river"));
diff --git a/src/settings_type.h b/src/settings_type.h
index 8dbc231a22..1fe393c37a 100644
--- a/src/settings_type.h
+++ b/src/settings_type.h
@@ -496,6 +496,7 @@ struct ConstructionSettings {
 	bool   build_object_area_permitted;      ///< whether building objects by area is permitted
 	Year   no_expire_objects_after;          ///< do not expire objects after this year
 	bool   ignore_object_intro_dates;        ///< allow players to build objects before their introduction dates (does not include during map generation)
+	bool   convert_town_road_no_houses;      ///< allow converting town roads to a type which does not allow houses
 
 	uint32 terraform_per_64k_frames;         ///< how many tile heights may, over a long period, be terraformed per 65536 frames?
 	uint16 terraform_frame_burst;            ///< how many tile heights may, over a short period, be terraformed?
diff --git a/src/table/settings/settings.ini b/src/table/settings/settings.ini
index 49e950f813..8cbf82f230 100644
--- a/src/table/settings/settings.ini
+++ b/src/table/settings/settings.ini
@@ -2221,6 +2221,14 @@ strhelp  = STR_CONFIG_SETTING_IGNORE_OBJECT_INTRO_DATES_HELPTEXT
 patxname = ""construction.ignore_object_intro_dates""
 post_cb  = [](auto) { InvalidateWindowClassesData(WC_BUILD_OBJECT, 0); }
 
+[SDT_BOOL]
+var      = construction.convert_town_road_no_houses
+def      = false
+str      = STR_CONFIG_SETTING_ALLOW_CONVERT_TOWN_ROAD_NO_HOUSES
+strhelp  = STR_CONFIG_SETTING_ALLOW_CONVERT_TOWN_ROAD_NO_HOUSES_HELPTEXT
+cat      = SC_EXPERT
+patxname = ""construction.convert_town_road_no_houses""
+
 [SDT_BOOL]
 var      = station.adjacent_stations
 from     = SLV_62