This research explores new computational analysis and design techniques in order to develop a bio-climatic strategy for urban development at the scale of the neighbourhood. A model is developed that incorporates micro-climatic physics that is tested on selected vernacular morphologies. The abstracted principles drive the design of new morphologies (generated by genetic algorithm and environmental softwares) suitable for current patterns of living, responsive to new demographics, social structures and materials within the context of contemporary cities in arid climates.