User blog comment:Harold Burned-Mane/The Truth about Ulfric Stormcloak/@comment-17114085-20130912151507/@comment-1600847-20130912220102

Prevent fighting: Like I said, other cities have them living side-by-side without trouble, so I highly doubt it's that.

Available housing: I've heard people use the argument "why would Ulfric build the Argonians houses during a war?". This falls apart quickly when you realise they've been kept out of Windhelm since before the Civil War even started, so it's not that.

Prejudice: Apart from ignoring non-Nords in trouble in Eastmarch, Ulfric doesn't show any signs of prejudice, so I'm not sure if that's why he forbids them from entering.

I'm honestly confused as to why he issued that decree. Maybe it's because the Shatter-Shields hate them (as evidenced by Torbjorn's dialogue in a miscellanneous quest for one of the Argonians) and Ulfric didn't want to anger his followers? I'm not sure.