As before-and-after pictures go, this one is more surprising than most. Take a plain little 1950s house on one of London’s invisible but oh-so-real boundaries – straddling the border between chic Barnsbury and the urban grit of Caledonian Road – and turn it into an icon of modernist cool. At first glance, you think this must be a demolish-and-rebuild number. But no. The little old house is still in there. It’s just had a radical makeover. This is the power of clever design.

It helps that the project is the work of an ingenious architect for his own family. Charles Humphries, 46, has designed many a multimillion-pound pile for wealthy clients. But when he bought the house with his lawyer wife, Caroline, 45, in 1995, he was a struggling young architect and the country was emerging from a recession.

They paid just £100,000 – cheap for N1, the real Islington, even then.

It was a poky, nondescript place, part of what, these days, would be called key-worker housing. In the 1950s, the Home Office had built a group of policemen’s houses on a bomb site there. Most are in an adjacent terrace, but there was enough room to squeeze in one more – this one – as a stand-alone detached house with a tiny garden.

It is situated round the corner from its companion terrace, but faces the same way, which means it was sideways on to its own street and set slightly back. All in all, it was a bit of a leftover – and, since a water tank had burst in the roof, it was in a right old mess as well. But that’s the kind of place rising architects like to get their teeth into.

Humphries’s first move was fairly conventional: he added a neat little kitchen extension beneath a curving roof onto the back of the house, at a cost of £25,000. This, together with a partial loft conversion a couple of years later, served the couple well for some time, but as their son, Justin, now nine, grew, they began to hanker after more space.

So, in 2003, Humphries – by then running his own successful practice, Heat Architects – decided it was time to take the house by the scruff of its neck. Feel its collar, so to speak. And so commenced a bit of a planning battle.

Planners are usually fine with extensions, even in conservation areas such as this one, provided they are at the back of the house, or unobtrusively at the side, and don’t muck about with the street frontage. But Humphries had used up his permitted development allowance back when he did his kitchen extension.

Indeed, this time round, the whole point was to muck about with the street frontage, filling in the 6ft gap up to the pavement that the original builders had left when they plonked down what was a standard design. Because the house was sideways on to the pavement, this was a side extension that looked a bit like it was at the front. Moreover, Humphries wanted huge horizontal windows rather than pastiche Victorian vertical ones, and set out to replace the pitched-roof attic with a new, superinsulated, flat-roofed third floor.

This is a part of town where it is not unusual to find complete fake Victorian villas being built. All in all, the local planners didn’t quite know what to make of the design, but they decided it must break all kinds of rules. So, despite Islington’s stated policy of encouraging good modern design, they turned it down.

Humphries promptly went to appeal. The inspector decided the planners were making a great big fuss about nothing very much, and in October 2004, the design was approved. So the Humphries family got to stay in their own house, although they moved out into an accommodating neighbour’s home while the work was going on. Even architects aren’t always prepared to live in a place while it is effectively being gutted. They began work on the extension in June last year and finished in December.

“We wanted more space – and I wanted to make it sustainable,” says Humphries as we take tea in his kitchen, with its green-slate, oval island worktop. “And it has worked – my electricity bill has gone down to less than £1 a day.” Solar hot-water heaters and heat reclaim from the ventilation system help. However, this is anything but a hair-shirt kind of eco-house. It’s just a nice place to live that happens to be energy-efficient. And, because it contains a lot of the old house within itself, it could be said to be a perfect example of recycling.

The house may not have looked much before the makeover, but it was a solidly built little place with generous cavity walls that Humphries stuffed with insulation. Raising the roof to make a third floor, he created a superinsulated, white-rendered steel box on top. Another box – this time clad in greenish zinc – forms the two-storey extension to the street.

That left room on top for a big private balcony to the new main bedroom, set back behind huge sliding glass walls of the advanced double-glazed variety. Big though the glass areas are, you still get privacy: at pavement level, the glass has a milk-bottle finish, making it impossible for passers-by to see in. The bottom half of the glass in the bedroom on the floor above is treated the same way, but you can see out of the top half. In any case, the back of the house looks out over rows of other people’s back gardens, so there’s not much of an overlooking problem.

The result of all this is that while you keep your three-bedroom house, it is bigger all round. It is still not enormous, but is conceived on a grand scale to make the most of its light and space – although Humphries took care to leave intact the 1950s neoclassical front porch as a memory of the old place. It’s what you might call an ironic reference. Some modernist commentators don’t like that kind of thing. “You either get it or you don’t,” Humphries remarks.

With the more conventional improvements he had already made, the old house would have been worth about £650,000 by now, to judge from the prices unrenovated neighbours of the same type are fetching. The building work cost about £150,000 (presumably Humphries wasn’t charging himself design fees), but has paid for itself many times over. The house is now valued at £1.3m – and I am not a bit surprised.

In a way, it is not like a house at all. With its tiny little courtyard garden out the back – little more than the space you find on many a roof terrace – it feels a lot more like some kind of luxurious penthouse. If it wasn’t for the fact that it’s three storeys high, you wouldn’t be astonished to find it perched on top of some big block of apartments, rather than on terra firma.

But it tells you one thing: the most unpromising-looking caterpillars of houses can transform into beauteous butterflies. And save the planet at the same time. Not bad going.

Heat Architects; 020 7837 2211, www.heat-architecture.com

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