A mathematical model is developed in order to describe the network configuration and heating distribution to a Central District Heating System for an Urban Residential Community. The purpose of using this model is to optimize operating costs and to distribute heat to the Residential Community efficiently. In particular, because of the inherent nonlinearity and dual optimization of the problem a dyamic programming approach is taken. It is turned out that the optimal cost of the system is a strong non-linear function of the network. In particular, it is found that increasing N, the number of houses, may not necessarily imply increased costs. It is felt that past failure of producing economical systems may be due to the improper attention given to the network.