The outbreak of COVID-19 posed a challenge to global governance, residents’ happiness, and economic systems around the world. Since the crux of previous research centers on the reactions of both local and national governments, studies on how governance arrangement at the neighborhood level influences people’s happiness during the crisis response remain insufficient. This paper aims to explore the relationship between neighborhood governance and residents’ happiness based on first-hand data collected during Wuhan’s first lockdown. This study highlights the significance of neighborhood governance in crisis response, which includes providing diverse public services, ensuring access to life’s necessities, and offering prompt medical treatment. All of these factors are essential for maintaining overall satisfaction with governance and contributing to the happiness of individuals within the community. However, active governance actions do not always lead to favorable results. For example, increased group participation may lead to social conflicts among those involved, ultimately diminishing one’s happiness. Furthermore, the COVID-19 pandemic has acted as a risk ‘amplifier’, exposing and exacerbating pre-existinghukou-based social inequalities in the governance process. The impact of the pandemic on citizen happiness is the cumulative effect of both the immediate social crisis brought on by the pandemic and long-standing structural inequalities. To improve people’s happiness and establish inclusive policies, this paper advocates for a ‘people-centered’ urban governance that enhances public satisfaction and addresses the needs and priorities of migrant populations.