Compared to other capitals around the world, Ulaanbaatar is relatively young. Furthermore, the lifestyle of the Mongols was not conducive to permanent residency. Their most important domicile, the ger, was by its nature, mobile. Even now, a significant part of the population live in them--many in the country, but there are some semi-permanent ones in the city.
The gers are the small round structures in the picture above. They look like little oil storage tanks.
Here are some gers in a smaller town outside the capital.
This one, in Terelj National Park, is actually occupied.
The city maps mark the outlying territories as all gers, although the reality is that a lot of the buildings (the clutter near the top of the above photo) are houses.
I think they should build higher up on the hills so they can escape the worst of the bad air in the winter.