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Representing more than half of the Egyptian cities’ land use, housing is a major contributor to energy consumption and carbon emissions. What can be called; the 5th generation of Egyptian sustainable urban settlements is evaluated in this research. The potential of new housing typology arranged around courtyards with earth construction envelope to improve energy efficiency and reduce carbon footprints. For a south-east oriented apartments, the energy performance simulation of conventional detached and clustered attached housing with different envelope materials are compared. Results show that the clustered housing paradigm, accompanied with the Compressed Earth Blocks (CEB) envelope, reduced cooling loads during summer by 15.6%, annual energy consumption by 8.5% and 11.6% of carbon emissions compared to the conventional case of detached housing and Solid Cement Blocks (SCB) envelope. The study demonstrates the significance of employing such passive design strategies on improving sustainability measures, along with spotting a light on the character of such urban housing typology as another coin side.