Did more "urban" houses just start propping up in the village while the more rural houses were eventually abandoned and torn down, or were any houses actively renovated while the occupants would hang around (like my neighbors who are adding a second floor to their house)?
Basically, how did this develop?
Your picture of a narrow York street jammed with three-story houses contains an important part of the answer to your question. That street is so tight because space is limited in a town; it’s limited because towns were invariably enclosed by walls that restricted space for growth unless the walls were expanded. So people built “up”: shop on the ground floor, living quarters above, maybe a room above that to rent. Walls themselves were often what served as incentive for urban growth. They were one usual feature of what we call “pre-urban nuclei,” sites that favored the growth of a town around them. These nuclei were things like monasteries (walled), castles (walled), cathedrals (walled because they were the administrative centers of bishops). If you look at modern European cities, you often can see how at or near their center is a large church or castle, and nearby is a large place for a town market to set up—like [Nordlingen, Germany] (http://www.amusingplanet.com/2008/08/nordlingen-town-inside-meteorite-crater.html). Often you can also see remnants of the concentric rings around these sites that show the expansion of the walls as the town grows. This [map of medieval Aachen] (http://www.sanderusmaps.com/detail.cfm?c=3582) shows the growth. When towns were founded from scratch, like Louis IX’s [Aigues-Mortes] (http://tinyurl.com/lngwc2x) built in southern France as a port of embarkation for his crusade, it was laid out in a grid but first enclosed by a wall. Here’s Jacqueline Gaille’s [ brief discussion of the implication of pre-urban nuclei] (http://tinyurl.com/l43vuju) in medieval Languedoc from the collection Urban and Rural Communities in Medieval France: Provence and Languedoc, 1000-1500.
In an era where safety was a concern, walls were attractive to everyone. First, they provided a safe haven when there was danger; second, they were a good place to make money by selling things or services to people inside them. Third, if you were a merchant in the early days of the urban revival (c. 1000) and you were starting to prosper, you needed a place to store inventory while you traveled locally, so walls or structures built outside the wall (so you could easily inventory inside them is necessary) made sense. As villages evolved into towns—like Oxford and Cambridge, both situated at river crossings and thus likely places where traders would gather—walls were the first thing to go up once growth began, first of wood, then of stone. If you were a place where a local market was held regularly, you might also decide to provide walls as extra protection for people who gathered there.
But it wasn’t inevitable or even likely for a village to become a town. Remember that about 90% of medieval people were rural. I don’t know the history of how wood became brick but I assume—I know, not really allowed on AH!—that it was driven both by increasing prosperity, perhaps civic regulations to control fire hazards, and increasing ease of transporting building materials.
I believe it is due to the increase in wealth through various means. Such means would include geographical location, trade of the village or the skills of the villagers. Legends also play a part in the development of villages as it attracts the crowd from all over Europe, which in turn brings in the dough. Although not all villages made it into cities, some made it into towns instead, which would eventually transition to a village. Wealth is the key to the transition of settlements. That is a general answer to your first question.
To your second question, all the possible scenarios listed are acceptable ones. It is no different from moving to a new house. I believe you were referring to brick houses instead of stone because stone is extremely costly in terms of money and labour. Thus this makes stone buildings pretty uncommon in medieval times as compared to those made of brick. However I do believe "urban" houses develop the same way cities develop from villages, through an increase in wealth as the state economically progresses. This is to meet the demands of higher living standards from the medieval population.
I hope this could be of any help to you and I believe the image you link is more of a Tudor design of building rather than a Plantagenet design. Cheers. :)
