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To Pass on Lvl 2, make all your house on green, (all needed  enable) and 90+ of happynes.
to pass Lvl 3, i suppose it's same but with 2000+ villager

(+1)

How do we get 90 happiness? Some go to green momentarily but then go back to yellow soon.

OK, just tried again, temporarily lowered taxes to low, and could upgrade. After half the city or more upgrade their homes,  they re-downgraded them... At least I have access to tier II now.