This street is illegal. It’s too narrow so the terraces don’t have good solar access, there isn’t enough width for amenity such as trees, and there are privacy issues.
This is one of my favorite streets in Sydney. It’s in Paddington/Surry Hills (kind of on the border) near COFA. Walking through it is incredibly pleasant because the space is so well defined and the plants outside each terrace provide detail and interest. Kids can play in the street because cars aren’t allowed (some of the terraces have garages in the rear with lane access). Though it is a bit weird you can get so close to people’s windows.
In Sydney, most Council’s development controls plans and Landcom’s (the state development agency) Street Design Guidelines wouldn’t allow this street to be built today. I doubt any city in the US would let it be built either. True, allowing streets like this could easily result in undesirable outcomes, the whole reason for built form controls. No one wants slums. But when we control too much, maybe we remove the opportunity for interesting places to happen.