I think you really should have enough room for scaffolding. How are you going to take care of a wall that is physically touching your neighbor's wall? That wall ought to get inspected at least. It might need paint. If one house starts to collapse onto the other, then both have problems. You're also at a higher fire risk, even if the walls in the middle can't burn, because embers can more easily go from one roof to the other.
I think the scope of that fire is better attributed to: the police dropped a bomb from a police helicopter on the home where people were living, and it was a poor neighborhood that may not have had firewalls between dwellings. I've seen fires there where the shared walls are brick, and those firewalls do work.
