This concept is interesting as a way to secure critical government employees against espionage and extortion.

It would seem much more difficult to provide security/surveillance details for critical personnel (to prevent assassination or compromise by foreign agents) and their families (to prevent kidnap/extortion) living in bustling open cities, than to provide housing in secure facilities where such threats cannot even get near them.

If I were (say) Iran, I might not want my nuclear scientists living among the masses.