User blog comment:Harold Burned-Mane/The Truth about Ulfric Stormcloak/@comment-17114085-20130912151507/@comment-1600847-20130912185159

I don't think it's a fighting issue. In other cities, Argonians and Dunmer live side by side without trouble, i.e in Riften. And Suvaris Atheron will go down to the docks every day without trouble.

Ulfric became Jarl shortly after returning from the Great War, which was 30 years before the events of Skyrim. It could be that Scouts wasn't even born when Ulfric became Jarl, though we don't know his age.

Now, why would he issue this decree? I'll list the most likely reasons:

1) Lack of housing. 2) To prevent fighting with the Dunmer. 3) He is prejudiced against the Argonians.