Studies of the earliest urban settlements in the Nile Valley often neglect to address the significance of built environments for the ‘poor’ and their relationship with social organization. The western workers’ quarter at el-Lahun; the ḫnrt mentioned in hieratic papyri, has received little scholarly attention in comparison to the eastern area containing the ‘élite residences’. In 1889 Flinders Petrie noted that the western streets of the town showed signs of a greater degree of poverty. Later examinations indicated the presence of a type of corrective labor camp; what might be described today as a ‘ghetto’. Convicts may have been forced to live in such places of confinement as a form of punishment. Life for a multitude of people in the ancient town of el-Lahun might, in fact, have been radically different from previously held views. Rather than a quiet township community, this article uncovers a social order built upon racial discrimination and cultural intolerance, marked by seclusion, coercion, and possibly violence.