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Well, in the Dungeon and Fortress, human units would look out of place. In the Dungeon, human heroes are Warlocks who create various Spectres, Minotaurs, and let them fight for them. In other cities, human heroes are mercenaries or defectors (except for the Castle). But in the Stronghold, human units would look perfect. Just remember the Chronicles with Tarnum; the texts mentioned that his army included humans in addition to the green-skinned creatures, but the developers didn't include them in the city, that's all, but that's not a reason for them not to exist there.