This article details the evolving social and spatial dynamics of a planning approach that is now being used to regulate irregular or informal settlements in the conservation zone of Xochimilco in the Federal District of Mexico City. As part of the elaboration of ‘normative’ planning policies and practices, this approach counts, maps and then classifies irregular settlements into different categories with distinct land‐use regularization possibilities. These spatial calculations establish a continuum of ‘gray’ spaces, placing many settlements in a kind of planning limbo on so‐called ‘green’ conservation land. The research suggests that these spatial calculations are now an important part of enacting land‐use planning and presenting a useful ‘technical’ veneer through which the state negotiates competing claims to space. Based on a case study of an irregular settlement, the article examines how the state is implicated in the production and regulation of irregularity as part of a larger strategy of spatial governance. The research explores how planning ‘knowledges’ and ‘techniques’ help to create fragmented but ‘governable’ spaces that force communities to compete for land‐use regularization. The analysis raises questions about the conception of informality as something that, among other things, simply takes place outside of the formal planning system.