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In a laneway that’s nearly invisible from the street. Superkul Architects has built a bright, open, 1,250-square-foot house for two professionals.Shai Gil

"Kensington Market is sort of a Holy Grail for architects," says Meg Graham, a principal in the design-oriented firm Superkül Architects. And why? "Because when you get a project here," she says, "it's going to be a puzzle to make it work." Indeed, these tiny streets are where you find the wild id of Toronto urbanism. A door at the end of an alley leads to old men's mahjong games. Restaurants and apartments spill out of old houses, and old storefronts tumble out from behind new ones. The current rules of city-building don't seem to apply.

And here, in a laneway that's nearly invisible from the street, is the result of Superkül's newest project. Walk down the lane and then zig one way past a Victorian workers' cottage, zag the other way, and you reach the front door of a 1,250-square-foot house, redesigned by Superkül as an open, bright home for two professionals.

When they bought it, it was an odd wooden bungalow that had just been partly destroyed by a fire. After a long search for a new house, they saw it as a blank canvas. "The windows were boarded up, and there were weeds everywhere," says one of the homeowners. "We thought our agent was joking. But she said, 'This is the place for you.' And we called Superkül right away."

That's because of another laneway house. Superkül has built and renovated large homes, a community centre and offices, but the office – run by Graham and her husband Andre D'Elia – is most famous for another small reno, the 40_R Laneway House in midtown Toronto. "We knew there would be zoning issues, we knew there would be issues with building on this site, and we thought they could handle it," the homeowner says.

The owners, one of whom is a design professional, also wanted to get the maximum elegance into this scruffy spot. The couple, who met in Kensington and love the neighbourhood, share their architects' fascination with labyrinthine corners of the city. "We're very interested in the work of Japanese architects," says the first homeowner. In the Japanese metropolis, especially Tokyo, stratospheric real estate prices have created a genre of houses that squeeze into cramped, often irregular sites. The Gradient House's lot may be the most Tokyo-like site in Toronto. It's an L-shaped property – the front yard extends into a path in front of the neighbours' house – and it is surrounded on all four sides by buildings.

And they wanted to move in within a year – which also meant that Graham, D'Elia and project designer Deborah Wang had to work within the existing zoning rules, and work quickly. "We almost said no," Graham recalls with a laugh. "But the more challenging the project, the more interesting it is."

The finished house is, from a visitor's point of view, both of those things. It's full of fascinating details that hold subtle conceptual surprises. First, the facade: while the house's flat front, gabled roof and dormer harmonize with the neighbours, the materials – galvanized steel on the roof, grey cement board on the front facade, and steel accents – speak of a modernist update.

Indoors there's nothing 19th-century in sight; the first floor is an open space – shockingly large! – with white walls and pale oak floors. An open, minimally detailed kitchen and dining area are to the left, a living room straight ahead, and a door to the right leads to a guest bedroom. Simple enough. But past the kitchen, the ceiling that balloons upward at the back to meet the roofline; the living area is lit by another skylight that cuts through the middle of the space upstairs. And glass doors (not enormous, just large enough) open to the small backyard and a Kensington riot of collapsing fence and rough corners.

And look closer. Almost all the windows are the same shape. "The house is almost square, and we kept that language throughout," says Graham. "You'll find a lot of the windows are perfectly square." In this way, and with the pale materials of the interior, Graham and Wang created a quiet harmony that balances out the noise on the outside.

The upstairs is, on paper, similarly modest. Tucked between the dormers of the house, a diminutive space holds one bedroom, a bath, a laundry room and a small den that the couple uses as a music room. And yet, there's a moment when you reach the top of the winding stairs, and then pause on a narrow corridor: In front of you is an open atrium with a skylight, the living room is below you, the bedroom opens up to the left – with large windows of its own – and a bathroom door opens behind you. This is the most cramped place in a small building, and it feels enormous.

Graham says the spaces of the house represent a subtle variation on the original form. "We did add volume by changing the pitch of the existing roof," she says, "and the dormers are new – but we kept the basic language of the place; we changed the expression of it, and we made much more of the second floor."

That meant keeping the gabled roof intact, which is a brave move in the world of contemporary architecture. Graham says they were motivated by notions of fealty to the neighbourhood context, as crazy as it is. "And also, frankly, as a studio we've been interested in doing pitched roofs for a couple of years now," she says with a laugh. "This seemed like the project to do it."

They did add one significant twist to that classic architectural language. The dormers on the roof are unusually large and deep, and the windows are not, as in most houses, at the outside edge of the dormers; they're at the inside edge, so the structure of the dormer acts like a hood pulled over the eyes of the house. That leaves the windows in shade, covered from the sides, and it makes it very difficult for neighbours to see through them. Since one of those windows is in a bathroom, that idea is especially important. "And it works beautifully," says the second homeowner. "Where you want to be hidden, you move to the side, and you're invisible."

"The design's so appropriate for the neighbourhood," he adds "because it's not a glass box. It's got a sense of openness, but it closes when it needs to. It's almost like a magic trick." Or, perhaps, a puzzle, resolved in a few skillful moves.