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Urban Fantasy requires world creation. Just like traditional fantasy. It doesn’t take place on Middle Earth but rather in a modern city with a slight twist. It can be hidden like Neverwhere, where the ‘others’ just aren’t seen by normal people and live in the subway tunnels. You can have a parallel history like Dead Witch Walking, where 1/3 of the world’s population died off and all the vampires and werewolves came out of the closet. It can be our world but focus on the society of the vampires and were-creatures like the Anita Blake and Harry Dresdin novels. The same modern science and technology applies but there is definitely a different social order involved. The reason that it is Fantasy is because of the alternate reality, something that takes place within our world without that different world aspect would probably be considered “paranormal” or “horror” depending on the story.
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