The producers of the Leprechaun franchise must have figured they hit on something clever when they sent the leprechaun into space in the previous movie, because the fifth film in the series finds the little Irish psychopath in another incongruous location, the inner city (or the movie version of it, at least). We're back in the present day (or thereabouts), following a silly prologue that seems to take place sometime in the 1970s, with Ice-T as an afro'd pimp who discovers the leprechaun hidden behind a wall in a warehouse. For some reason, the fifth movie is when the producers have decided to pay some real attention to continuity, so we get the return of the magical amulet from Leprechaun 3, which can turn the leprechaun into a stone statue. That's what Ice-T's Mack Daddy does, keeping the leprechaun trapped for the next 20 years or so while Mack Daddy goes from pimp to music mogul.
He does that thanks to the latest random addition to the leprechaun mythos, a magic flute that mesmerizes people when it's played and makes them susceptible to any music they hear. A trio of aspiring rappers accidentally free the leprechaun while ransacking Mack Daddy's office, and they also steal the flute, which helps them make their dreams of music-business stardom start to come true. So both Mack Daddy and the leprechaun are after the would-be hip-hop stars, both wanting to get the flute back (once again the leprechaun's focus has shifted from his gold to a new goal). The other continuity element seems to place this movie as a prequel to Leprechaun 3, since the rappers keep talking about heading to Las Vegas to compete in a rap contest (where they will presumably bring the petrified leprechaun along with them).
But we never actually get there, making the half-assed continuity even more pointless. The leprechaun isn't even defeated this time around, and given that Mack Daddy serves as just as important a villain, poor Warwick Davis just disappears for long stretches of the movie. At least the comedic tone is back after the ugly grimness of Leprechaun 4: In Space, and the leprechaun's rhyming is back as well, much more cleverly written than in Leprechaun 3. The plot, of course, makes little sense, and it's mostly just an excuse for dumb jokes combining the leprechaun's Irish mannerisms with street slang. He smokes pot, he enlists an army of hypnotized strippers to do his bidding, and he even delivers a surprisingly catchy and amusing rap song at the end. The threadbare production (many scenes are filmed in a single wide shot, like there wasn't any time or budget for coverage) hampers the overall entertainment value, but Leprechaun in the Hood is still occasionally fun to watch, and certainly a more successful hybrid experiment than sending the leprechaun to space.
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