SDR: I guess you are aware that the soils will need to have certain absorbtive characteristics to do grey water.The leach fields which are similiar to septic drain fields have to be pretty deep.I wonder about the usefullness of the water infiltrating the soil at 18″ Permitting is tough and on a urban or suburban site I would be surprised if you can get a permit. Hepatitis can be spread by airborne spores from a faulty system. I think that is the biggest risk from grey water. Black water …forget it.
On topic: For fairly dense areas I like Perry’s choice of the front or side of yard courtyard style. That space would otherwise never be used socially(by adults), yet being near to the living room and Kitchen areas is perfect intimate indoor/outdoor living/entertainment. If you have no back yard and open front yard like jeeman is describing,the lack of a private or intimate outdoor setting just seems to provide for a living in a fishbowl effect. One blogger, I don’t remember who, pointed out that the open front yards are nice in that the neighborhood kids have places to play where they are still in view of the various parents. That aspect seems like a plus for families.