To call Bombay Beach [2] a documentary is only half the story; it's what adorns and nourishes that framework that makes it so beautiful and distinctive. The Israeli filmmaker Alma Har'el spent a year living among the residents of Bombay Beach, a failed and forgotten development (now a "census designated place") on the Salton Sea in Southern California. What began as a "miracle in the desert" heralded in the 1950s as the holiday destination of the future has become a desiccated scrap of land that the term "Nowhereville" comes nowhere close to describing. But just as many of the people who live there have refused to be cowed by their surroundings, so Har'el has conjured from this apparently bleak terrain a film of warmth, lyricism and vitality.

The film's focus falls initially on the Parrish family. Mum and Dad served two years in prison after the authorities discovered guns and explosives in their home. (The family's enthusiasm for blowing things up knew no bounds; if you were to say that their land looked like a bomb site, you would have hit the UXB on the head.) Their children were put into care, and upon their return it was noted that the youngest son, Benny, was "a little different". When we first meet him, he is rehearsing, heartbreakingly, what he would say if someone ever tried to take him into care again. Although he is aggressively medicated (a visit to the doctor, whose expression embodies the phrase "clutching at straws", ends in the suggestion that the boy's Ritalin dosage should be increased), his humour and energy burst off the screen. He sashays along the desolate street in a gaudy pink wig, and announces via a hand-puppet at the Behavioural Health Clinic that he wants to be a weirdo when he grows up. He is an original, and the film's urchin star.

The Parrish family's neighbours include Red, a leather-faced, self-described "bum" who makes Harry Dean Stanton look like Justin Bieber. Red just about scrapes by selling cigarettes for a quarter a pop; he recollects a life scratched out in the shadow of a failed marriage and a 50-year estrangement from his two children. For him, Bombay Beach is both sanctuary and final resting place, whereas for Ceejay, a teenager who fled South Central LA after his cousin was gunned down, it represents hope. If he can hoist his grades, Ceejay has a shot at a football scholarship. He's also in love with a pal's sister, who might be his if he can only extricate her from an obsessive boyfriend.

Bombay Beach features a mix of genuine fly-on-the-wall material and scenes set up by the director, such as the numerous dance sequences and a delicately revealing episode in which Ceejay and his friends address chat-up lines to one of the blank-faced white masks from his frantic hip-hop routines. Not so long ago there seemed to be a purge on any element of fabrication in documentary; this coincided with the revelation in popular culture at large that Bear Grylls was actually being transported between woodland hide-outs in a sedan chair. The director Dominic Savage (whose films include the banking-crisis drama Freefall) was on the sharp end of this rebellion against the inauthentic when he made Rogue Males, a 1998 Channel 4 film about Salford scallywags. An incident in which his subjects had posed as cowboy builders was restaged using actors, but without the distinction being made for viewers between documentary and reconstruction.

"I wasn't cynically restaging stuff," he told [3] me in 2009. "What you could accuse me of was naivety. And that was the point where it became so important for me to create drama, because I didn't want to be restricted by that sort of thing." He expressed also an ambivalence to the documentary form in general: "I found the exposure of real people very hard to bear. Even if you make a documentary with the greatest love and care, there's always going to be some betrayal. However much you are trusted by the person whom you're filming, you are using them. You aren't really their friend. How can you be?"

I don't know. But Alma Har'el must come close. You can listen to her talking about the filmmaking process, and her relationship with her subjects, in this interview on Radio 3's Night Waves [4]. In common with the kind of scripted or conceived work I touched on a few weeks ago when writing here [5] about A Bigger Splash, there is now a new tolerance of supposed documentaries which are in fact partially engineered (there's a whole emerging wave of them in British cinema alone: The Arbor [6], Dreams of a Life [7] , Lawrence of Belgravia [8]).

Bombay Beach falls into this category, and is the most aesthetically (not to mention musically, with songs by Beirut and Bob Dylan) sophisticated example of the form; its scenes of corroded beauty make it something like a real-life Gummo [9]. It doesn't disguise its layer of artifice, but nor is there any doubt that the people in front of the camera are authentically themselves. Har'el also takes special care to frame and photograph them within the landscape. A particular compositional tendency of hers is to silhouette her subjects individually in front of a burnished sunset. They seem to be not merely living on the land, but growing out of it like exotic cacti.

"Bombay Beach" is released on Friday.