Not necessarily, but they can be a bad idea if you use ordinary, cheap terracotta in an exposed urban setting and expect it to survive winter without help. Terracotta is naturally porous. In freezing climates, water absorbed into the planter wall can expand when it freezes, and repeated freeze-thaw cycles can cause cracks, spalling, flaking, and sometimes complete failure. Small urban planter boxes are especially vulnerable because they hold less soil, dry out and freeze faster, and are often exposed to wind, reflected heat, and rapid temperature swings on balconies, roof terraces, and paved courtyards.
That does not mean all terracotta is unsuitable. Frost-proof or frost-resistant terracotta is fired at higher temperatures and is less porous, so it has a much better chance in cold climates. Large planter boxes also perform better than small ones because the soil mass moderates temperature and moisture swings. Good drainage is essential: use drainage holes, elevate the pot slightly off the ground, avoid saucers that hold water, and use a free-draining soil mix. In autumn, reduce watering, remove dead foliage, and mulch after the soil has cooled. If the planter is movable, shift it to a sheltered spot or insulate it with burlap, bubble wrap, or a surrounding layer of leaves. Choose plants that are hardy to your zone, and remember that the roots of plants in containers are more exposed than roots in the ground.
In dense urban areas, extra challenges include de-icing salt, wind exposure, limited drainage, and heat reflected from walls and paving. A decorative terracotta planter can still be a good design choice if it is used as a sleeve around a sturdy plastic or composite pot, or if it is genuinely frost-proof and managed carefully. If you want low-maintenance winter reliability, wood, metal, composite, fiberglass, or thick plastic planters are often safer choices.
So the honest answer is: terracotta urban planter boxes are not automatically a bad idea in freezing climates, but ordinary porous terracotta is a risky choice. Use frost-proof terracotta, choose larger planters, guarantee drainage, protect them from hard freezes, and select hardy plants. With those precautions, terracotta can work; without them, winter damage is likely.