This research addresses one of the major cumulative problems in Saudi Cities; the fragmented developments of urban lands. Such fragmentation is caused by wasteful standards and measures that are used during subdivision of land, and building control codes for residential units within plans after they are approved. Moreover, it is because of lack of application of urban information systems in neighbourhood planning. The main goal of this study is to draw up a guidance policy that defragments wasteful spaces and consequently reduces costs of both dwellings and neighbourhoods by adjusting consumption of space in regard to the socio-economic characteristics of the majority of the residents. The case study is Al-Madinah owing to it had unique form of traditional houses, and neighbourhoods known as `Ahwash'. They are the two main categories of units that form the city as a whole. At the end, the study draws a guidance technique as a recommendation for future planners to use Urban Information Systems as tools to study Neighbourhood Planning to de-fragment space within dwellings and neighbourhoods, and re-adjust building regulations with regard to their socio-economic characteristics and the local culture of Al-Madinah. The final results and proposals are a major contribution for the majority of residents who are still tenants to enable them to buy a plot and build on it, and the municipality can reduce the costs of their services among fragmented urban areas to upgrade their facilities within neighbourhoods, infrastructure agencies can reduce the cost of networks and improve the quality of their services and reduce the cost of service for public, and developers can understand the actual demands for housing not only for their own revenue by providing only luxury measures in dwellings but also to provide affordable dwellings that can be owned by residents with lower socio-economic characteristics.