Quote from Hunddayman
Simply, Just build you city's a little lower. Though I'm sure this will be fixed. He's onto it with the world height bugs
I can't build it lower. I used WorldEdit to move a chunk of land into the air, and moving it down would be risky because of the sheer size. Also, my tower is meant to go all the way to 256, and the lowest point in the tower's top room is still too high to sleep in.
It's been a problem for a few versions, and it hasn't been fixed, so I hope they are actually paying attention to this.