nd it breaks with the source material used for creating elves. It is humans that live in cities. All the non humans, the mythical creatures live elsewhere. ... not (in) regular cities
Human mythology about non-human creatures that are not animals, does not talk about them having regular cities in the human style.
Not even all human societies build cities for that matter. Smaller dwellings are not cities. And nomads do not have those either.
If you consider a non-human intelligent species with similar traits, for a story, you might of course project some human behaviour onto them. Including building and living in cities.
But the current cliche for a standard "Elf" is to live in the woods, in harmony with the woods. Maybe growing the trees to form a natural house. The favored weapon is a bow and the culture would be the guardians of the forest.
If you have desert dwelling creatures, that mine the hills for gold, and you call them elves, that will be asking for a lot of backstory, how they ended up there. Using the word "elf" invokes the known stereotypes and expectations in the reader/viewer/player. And the trope of elf, given no other information, will invoke things like wood dweller and guardian, agile, noble, long life span and even pointy ears. It does not invoke: lives in cities, just like humans do.
If you create a world where they do, it's a case of: that's how our elves live. They are different. Look. We made something original, but did not bother to come up with a name for these non-humans, that almost look like humans.