The article touches upon the idea of ‘smart city’ and ways of how it could be applied to advancing contemporary urban environment. Highlighting variety of definitions this popular term demonstrates there is posed a problem of apprehension both in theory and architectural practice. Authors place particular importance on social aspects of the method to be improved to make it adaptable to integrate with cultural heritage. Having referred to successful examples of heritage technological improvement authors claim ‘smart city’ to possess a level of ‘transparency’ high enough to create the superstructure of urban history basis, which is particularly significant for small towns and settlements of Russia. Finally ‘ smart technologies’ pretend to be an efficient strategy in Russian dispersal system for consistency enhancement.

The paper deals with the problems of historical settlements, which lead to the loss of their status and critical violations of the historical environment. The author analyzes the problems of historical settlements and their particularly vulnerable type – small formations – including social, political, economic, and scientific research. The author points out the need for complex innovative approaches that ensure not only the material restoration, but also the functional development of the historical environment, the introduction of new functions. The tools of working with the historical urban environment and its active functional inclusion in the modern discourse, models of increasing the value characteristics of urban objects, as well as the principles of implementing local potentials, which are laid in the basis of a holistic methodology, are considered. A strategy is proposed that solves the extremely acute issue of the urban significance of historical and cultural monuments on the basis of management tools and spatial planning, and tactical steps for its implementation are highlighted. The methodology obtained as a result of the study can be used as a basis for a national program aimed at developing and strengthening the social and economic role of small historical cities in the country’s settlement system.

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Today globalisation appears to evoke a set of problems, including spatial inequality and the necessity arises to elaborate an alternative paradigm. There are already known plenty of location theories, among which industrial regions or clusters appeal to local relations rather than global economic system. Being a perspective model of urban development, it is still hardly embodied in urban planning to solve regional problems efficiently. The article intends to contribute to the theory of clusters and adapt it to socio-economic principles which identify the existence of towns. The case of small towns and settlements illustrates how local potentials can be used for sustainable urban development.