I would expect things labelled urban fantasy or paranormal romance to be set in real-world cities - possibly made-up cities, but still intended to be within our known world, with some extra additions.
Definitely Gladstone's Craft sequence are challenging, because they are so clearly channelling that urban-fantasy vibe, within an entirely second-world setting, though with very strong correlation to real-world locations and concepts. (In a way, it's much like the Discworld, though in a different time period.)
For me, urban fantasy (with a romance subplot) and paranormal romance are separated the same way as fantasy (with a romance subplot) and fantasy romance - what's the key focus? Is it a romance book with fantasy stuff, or a fantasy book with romance stuff?
(This said, my personal goodreads tags don't follow this, because they're for me and not for helping others.

I label a book "urban" if it has an urban setting in whatever world, and "seriously urban" if that setting lies at the very heart of the story. So Craft, Lowtown, Matthew Swift, Rivers of London - all yes. But not e.g. the Divine Cities books, which despite their names are not really about their settings.)