Architecture: This desirable city slaughterhouse . . .: Jonathan Glancey looks at an imaginative way to make a silk purse where there used to be sows' ears

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Look at these pictures, taken by the architectural photographer Helene Binet. They show a low-cost, backstreet house in central London, converted from an abattoir. This is not a building site swept fastidiously for the photographer, but the finished product: no smooth plaster on the walls, no wallpaper, precious little furniture. The brick walls of the stripped-out slaughterhouse have been left as found; the ghost of a rainwater pipe can be seen coursing diagonally across the back wall of the ground-floor room, and the accidental handprints and bootprints of building workers remain on floors and walls.

Call this a home? Adam Caruso, a partner in the young architectural practice Caruso St John, does. It might look extreme, but it has its own raw beauty and is also a fine piece of urban design conceived with his partner, Peter St John.

These images are two of the most powerful in 'New British Architecture', an exhibition of the work of 12 young architectural practices on show at the Architecture Foundation, London. The Caruso St John house is not cosy and much too elemental for most people to consider a realistic home. Yet it is both beautiful and ingenious, making marvellous use of limited space and even better use of daylight in the thin strand of an alley. If the walls were lined, carpets laid and soft furniture installed, this gem of a house would begin to make popular sense.

Financially, it makes extremely good sense: the total cost of buying and transforming a brutal central London abattoir into a poetic three-storey house with large roof terrace (offering magnificent views), original architecture and new plumbing and wiring has been pounds 81,000. This is proof - because proof is very much needed in a country given to buying mass-produced Joke Oak and Neo-Georgian houses from spec-builders' catalogues - that imagination and architecture does not come at a premium.

Caruso's house is a delight, offering a generosity of accommodation and response to daylight (light penetrates the inner reaches of the building) that no spec- builder or architect aiming to please planning committees could hope to achieve.

You are probably still unconvinced; particularly, perhaps, because all the newspaper page can show you is dramatic imagery and a building that makes use of unfamiliar materials on the outside and eschews familiar fittings and decoration inside. But the house is an experiment, a way of thinking through what a cheap, urban residence of the immediate future could be.

Other prototype houses on show at the Architecture Foundation suggest different ways of going about the same task. All are intelligently provocative, designed to make us consider how we might live, simply, ecologically and inexpensively. Few home-makers will want to go so far as Caruso's back-to-basics asceticism, but what anyone can learn from his design is how the most unlikely industrial building in a city back street can become an intelligent home and how modern materials make for cheap, robust and reliable ways of building and why a city house does not need to look the way we imagine it should.

The exterior - derived in spirit from Tony Fretton's Lisson Gallery in Marylebone - makes exemplary use of a relatively new translucent insulating glass panel system made in Germany. This obviates the need for shutters or curtains, while letting soft light shimmer into the interior. Elsewhere, the architects have made much use of varnished medium-density fibreboard, aluminium and galvanised steel. One can imagine the house transformed inside to suit different tastes. It has been engineered by Alan Baxter and Associates, a firm that works closely with architects trying to revitalise neglected patches of city centres.

Caruso St John is now working on a house in Lincolnshire, and again making maximum and effective use of limited money. Their contemporaries, as 'New British Architecture' shows, have different, though complementary, designs on small-scale, low-cost housing.

Alex de Rijke suggests floating houses moored on rivers flowing through city centres. Basing his design on an old 'lighter' (an obsolete cargo barge), De Rijke proposes prefabricated living accommodation put up like an umbrella when the lighter is moored in position.

Birds Portchmouth Russum Architects, who designed what must be Britain's best car park (the 'Avenue de Chartres', Chichester), have come up with 'Pacemaker', an easily transportable service core incorporating kitchen, bathroom and washroom, that can be implanted in any cheap house, urban, suburban or rural.

This is a contemporary reworking of an idea once mooted for Victorian terraced housing that had survived the Blitz in east London. Instead of demolishing homes that, though inadequate and poorly serviced, were much liked by most residents, and replacing them with tower blocks, a number of architects in the Fifties had the idea of plugging an up-to-the-minute service core into old houses. Sadly, this sane and gentle idea was never adopted. Well, here is the same sensible suggestion, enjoyably reworked by three young architects who once worked for the late Sir James Stirling.

Simon Conder Associates has designed a contemporary and ecologically sound version of the classic and much- loved Georgian square without resort to historical pastiche; Studio Granda (now based in Reykjavik) has answered the 19- point brief of an artist friend who wants a house wholly undistinguishable from his neighbours' on the outside, yet immensely rich in its use of interior space; and Ushida Findlay Associates (British trained, Tokyo based) shows an 'organic' house based on the shape of a seashell for a determinedly and aggressively urban quarter of downtown Tokyo.

'New British Architecture' is a gem of an exhibition. It does not promote one line of thinking or the work of big names. Instead, it introduces 12 very different young architectural practices, with 12 very different ideas about the way we might come to terms with city living.

Taken together, their work suggests no emerging movement or consensus; what it does demonstrate clearly, however, is that there is a seam of imaginative and highly responsible talent waiting to be mined by intelligent clients. And, as Peter St John and Adam Caruso show so poetically, you do not need to be arty, privileged or rich to enjoy the fruits of the best young architectural talent.

'New British Architecture' until 15 May, entrance free. The Architecture Foundation, 30 Bury Street, London SW1 (071-839 9389).

(Photograph omitted)