The wrong answers to flaw questions fall into only a few categories. Most of them are out of scope or unsupported. I think the trickiest ones, as you mention, are ones that have strange wording. I suggest you delve deep into those strange ones so that you build up your ability to untangle them. The goal is to be able to quickly say "that sounds good, but you didn't do that!" -- which is usually the situation with those.
The core of this argument is that Spoonville must have the same problems as Oldtown since they two cities have the same area and population size.
The flaw in this argument, which ideally you noticed as you considered before looking at the answer choices, is that there could be other factors that cause the health problems in Oldtown. Maybe there are rats there. (E) nails this issue. It basically says that the argument ignored that while they could have the same size and population (density), there could be other issues that make one more livable than the other.
I suggest you try to untangle all the other answers and then see if you interpret them somehow differently than I do (and perhaps you have a more accurate read than this).
(A) is basically saying that the argument says that the conditions cannot be caused by the living conditions. The argument doesn't say this.
(B) says that the argument combines populations number and physical area. The argument doesn't do this. It notes both of them.
(C) is out of scope. There's no discussion of life expectancy.
(D) is out of scope. There's no discussion of the severity of the different health problems.