Why is Er lebt über mir incorrect?
I don't see why it wouldn't be correct, I reported it
Why is it mir?
It's the dative form of "Ich", indicating that "the living" takes place in the location in relation to you. Combined with 'über', it's above you.
I got it correct, although I would like to know if this alternative is ok too? - "Er wohnt oben mir" ??
oben means up, which isn't relative to anything, it just describes a very general place that is upwards. so you can't say oben mir / up me. But you could say Er wohnt oben / He lives up(stairs)
In addition to Paralars1: You could say: Er wohnt oberhalb von mir.