It is people who make the block, the neighborhood, the city. Then, in this urban fantasy, we can reconstruct the right kind of buildings around the people. So, the number one priority to make this thing of ours work is the grandmother with fat arms. Gray hair wrapped in a bun and a flowery housecoat would be nice, too, but fat arms are a must. On those, she can rest on the windowsill of her third-floor apartment and keep watch over the kids.
Kids are the second priority.
There must be families. Define the parents any way you wish - traditional couple, single, adoptive, gay, foster. Throw them all in there. They live in the apartments and condos situated above the stores. The kids play mainly on the street, which must be one-way, with a posted speed limit of 15 m.