Eurostar trains snaking towards Folkestone and Old Europe, commuter carriages straining towards executive suburbs, expresses full to the gunwales bound for Southampton and Bournemouth, all pass within a carriage-width of Centaur Street, off Hercules Road in south London. William Blake lived here, his name commemorated in a low-key council estate running parallel to the railway viaduct that leads south and west through the badlands of Waterloo.  Shoehorned between railway tracks, 18th-century cottages and housing estates is one of the best new apartment blocks in Britain, a minor masterpiece that will surely make the reputation of its architects dRMM (de Rijke Marsh Morgan). It points the way to the kind of compact housing our cities need, but which so many of our architects and house-builders find difficult to achieve.  The apartment block, One Centaur Street, rises four storeys from what had seemed a very unpromising site, a narrow strip of land that had been a scrapyard for many years. The prince of Centaur Street is Roger Zogolovitch, architect, developer and course director of the London School of Economics' cities programme. Zogolovitch has put his own money into this building and, although it is a commercial concern, he is unlikely to reap much profit. This, however, is not the point: One Centaur Place is a prototype for intelligent and elegant city housing that could happily be repeated, and profitably so.  "If the planners had agreed," says Alex de Rijke,"we could have continued the design up to as many as 20 storeys. Of course, this was impossible in this particular location, but the idea of the building is that it can be recreated in any number of patterns: higher, lower, using different colours and finishes and with different internal layouts.  "The cost of this kind of block would fall if we were able to build several at once but, in any case, we have made as much use as possible of prefabricated and off-the-shelf components to keep costs down. This is also an aesthetic we like."  A solid concrete block is clad in a form of contemporary clapboard. What might be taken for old railway sleepers bolted along the walls turn out to be dark, concrete sections animating all four sides of the building. Set close together at its base, they grow wider apart as the building pops its head above the railway viaduct, causing the block to lighten as it rises into the London sky.  This clever, yet restrained, use of materials continues throughout the building. De Rijke and his partners, Philip Marsh and Sadie Morgan, have created their own vocabulary of materials, playing intelligently with unusual woods and tiles offset by finely finished concrete, glass and industrial components.  The great thing about this residential building is that it is a hybrid, fusing, as de Rijke points out, "the European horizontal apartment and the English vertical terraced house". In practice, this means that each of the light and thoughtfully planned flats is arranged on several levels connected by a contemporary take on the traditional, narrow London staircase. The effect is of living in a small, sunlit house inside an apartment block. The block, seen as a single entity from the outside, is rather like a Rubik cube inside.  There is nothing tricky or quaint here: the building is an unpretentious architectural ship berthed in a tight London dock. It boasts balconies on all floors: recessed on its sunny south side, projecting on to the street on its north side.  Its top deck (roof terraces for the penthouse flats) is contained by Key-Klamp railings, the sort you expect to find guarding zebra crossings outside school gates. These penthouses would be ideal city pads for railway buffs: the view here is like looking down on a train set, with the backdrop of the Palace of Westminster and the London Eye.  Below, residents will share a garden made of concrete and old timber railway sleepers, adorned with magnolia trees and lined with honeysuckle, willowherb (a railway plant), busy Lizzie and London pride. The architects are so pleased with the building that they have bought the ground floor to use as their office. The other flats are for sale.  It is curious that buildings like this are so rare. We have all but forgotten how to build compact city housing so intelligently. The 18th-century terrace that paces along the side of One Centaur Street is a perfect (and perfectly average) example of the type of handsomely proportioned, plain English housing that developers used to run up in their tens of thousands. Whatever street they occupy, they always look good. Cheap to build, easy to repair, flexible in use, they have stood the test of time and continue to define the look of so much of London and other cities. A grim 1970s (possibly 1980s) housing block jostling for attention elsewhere in this mix is an example of where we have gone wrong. With its tiny windows, childish play of materials, tiny pitched roofs and general toytown aesthetic, it is far better suited to a cul-de-sac an hour down the line from Waterloo than a street where Blake once walked and some of the greatest poetry in the English language was written.  We seem to have no problem with converting old buildings into modern flats, but find the design of the modern equivalent of old London terraced housing difficult. Who is to blame? Planners? Architects? House builders? House buyers? Possibly a poorly informed alliance of all four. It is difficult for house buyers to make proper choices or get their voices heard in the city housing market. It is only when there are examples to look at, such as One Centaur Street, that any of us can see what a desirable yet low-cost modern city home might be like. London is a city built largely by developers, although much of its finest, cheaper homes were designed and paid for by public bodies like the munificent old London County Council (1889-1965).  What our cities need is developers with the intelligent concern and willingness to take risks of Roger Zogolovitch, the talents of architects like dRMM and local authority officers keen to create a new generation of popular housing free of sentimentality, kitsch detailing and wilfully anti-urban design. Standing alongside one of the busiest main line railways in Europe, One Centaur Place might not be everyone's choice, but as a pointer to the standard of city housing we can easily have if we want it, it is all but peerless.  · For more information, call 020-7399 8600.
It sits in a scrapyard and there's a railway line outside the window. My dream place, says Jonathan Glancey.