Fun fact: in (British) English, an 'Alley' (rhymes with valley) is a narrow way which goes between streets and is too narrow for cars or carts. It may run along the back of a row of houses, or (more usually) between adjacent buildings. A path which goes from the front of a house to the back garden may be known as a 'side alley', especially if it runs directly between two adjacent houses. Alleys were used historically for smugglers to escape the customs officers among other things! The town where I grew up has lots of alleys which connect sets of parallel streets, and many of them have names. The most famous one is 'Squeezegut Alley', which is only about 40 cm wide at its narrowest!
In some parts of northern England, I believe 'ginnel' (said with a hard g) is fairly synonymous.
We have alleys in the U.S., too. Not so much in suburban areas, but all over the cities and small towns. They run between the houses, like you described, and even more often behind. The ones behind a row of houses are usually wide enough for cars, but not intended for "through traffic," sometimes paved just with gravel. Sometimes people have a carport or garage behind the house, and the front of the house is set up only for foot traffic. I have always liked that set-up, which includes a large front porch as well, or at least a wide front stoop. I don't think anyone is building homes like that anymore, but there are lots of them still standing from previous decades. I wish I had a big front porch!!!
I'm tickled to learn the word "ginnel," and I especially like the name of that alley, "Squeezegut"! That is great! Hahaha!
But in this case, at least in British English, it should be "in". We use "at" for a specific address - I live at 21 Oxford Avenue. We use in for a specific road or in general - I live in Oxford Avenue or I live in an avenue.
On gets used for specific situations or buildings e.g. I live in one of the new houses on Oxford Avenue.
This is marking "I live in an avenue" wrong when its absolutely the correct way to say such a generic place location, well in British English it is at least.
I hope "in" will be allowed.
"On" in this situation is correct in American English. We always live "on" a street.
Hey, this makes me think....in My Fair Lady, my favorite song, "On the Street Where You Live" is incorrect for an English man to be singing. It should be "In the Street Where You Live," I guess.