It sounds exactly like Ho Chi Minh City here in Vietnam. The solution isn't hard -- the government uses imminent domain, takes a few metres of land on each side, and compensates existing owners.
Not trying to nitpick, but just a heads-up that the term is " eminent domain" (I know it's a pet-peeve when people don't correct me if I'm saying something wrong, but feel free to ignore me if you don't care).