This is the story of a tiny house that overcame mansion-sized hurdles in its quest to become a wee bit more commodious (97 square feet were added to the existing 806) and a lot more hospitable. Built as an infill shack between two larger buildings at the turn of the last century, the warren of small, light-blocking rooms on split levels was more conducive to claustrophobia than California dreaming, despite its idyllic locale.

“I’d always wanted to live on Telegraph Hill, and when I saw this house, I knew I had to have it,” recalls Susanna Dulkinys, of falling in love with the fixer-upper she likens to a doll’s house (identified erroneously on some maps as being the smallest house in the city). The view from this steep street of secret alleys and garden-shrouded stairways is so rife with iconic signifiers—the swoop of the Bay Bridge, gulls cruising the water, palm trees lining the Embarcadero, and the tip of the Transamerica Pyramid—it could be identified as San Francisco by a Martian.

Dwell first reported on the renovation travails of Dulkinys, a graphic designer and former Wired creative director, and her partner, typography guru Erik Spiekermann (who together run United Designers Network, a global design consortium), back in 2000. Although the house had survived the great quake of 1906, its future was nearly undone by litigious neighbors who used their favorable easements to try to stymie construction; the local Telegraph Hill Dwellers association, whose members never met a bay window they didn’t like (despite the original house’s having none); and a backlogged planning commission. Against these obstacles, the dry rot, lack of foundation, and solid bedrock were but mere speed bumps on the road to renovation. It didn’t help matters that the couple was also remodeling their Berlin apartment, where they spend half the year.

“We had two homes and nowhere to live! These neighbors simply didn’t want any work to happen at all,” exclaims Dulkinys, recalling the frustration. “Our house in Germany was completed in half the time, despite being twice the size—and all the drawers and doors open and shut properly,” adds Spiekermann, with just a touch of hometown pride. But six years, two architects, and assorted attorneys and soil and structural engineers later, the couple has moved back into an open, light-filled, two-story house that resembles nothing so much as a junior suite in the hotel of your dreams: bathtub by Starck, wireless media center, large deck, gourmet kitchen, and even room to put up a guest.

After the original architect was ground down by the friction that met his plans for demolition and a radically modern makeover, Dulkinys and Spiekermann turned to their then-officemates, John Holey and Chris Wendel, who had served as testifying architects on behalf of the project (and fortuitously happened to be neighbors of one of the adjacent buildings’ owners). Holey Associates, whose other projects range from Apple’s corporate headquarters to the chic Berkeley tapas bar César, offered a design that placated some of the opposition by preser-ving the house’s façade (although they swapped out the stucco for crisp wood slats). “At one point we discussed doing a flat metal front, but it would have created so much more grief,” explains Holey, grimacing slightly at the memory. So they focused on the inside. “Rather than playing to its Victorian heritage—small rooms, lots of doors, bitty tiles—we aspired to design a modern translation of the house, one that suits the way Erik and Susanna live.” Says Spiekermann with admiration, “John’s a pragmatic modernist, not an ideological modernist. The house isn’t barren or austere—and he was able to get it approved.”

While there’s not an iota of wasted space, one doesn’t get that cramped, slightly depressing, über-utilitarian sense of being on a boat, for example, despite the house measuring a mere nine and a half feet across. With a mantra of “How small can it be, how large can it feel?,” the architects managed to slot ten rooms (or functions) in about 900 square feet, thanks in part to replacing doors with translucent scrims of fabric that open up to let in light or pull closed to confer privacy. “If the classic Victorian house is a railroad flat—a long corridor sprouting tiny rooms—we think of this as more of a matchbox,” Holey explains. “It can extend or condense to suit your need.”

On the main floor, a guest room/office just big enough for a bed to unfold overlooks the street and has direct access to the powder room. When it’s time to turn in, a diaphanous pocket panel of pale blue pinstripe fabric from Knoll Textiles draws shut. The sitting area is a wireless media room, with a wall doubling as a movie screen. And in the dining room, the long German worktable surrounded by Arne Jacobsen chairs is sized to accommodate a crowd. During parties, another fabric panel can be closed to foster intimacy (and hide the mess in the adjacent kitchen) or left open for a view straight to the back of the deck.

Downstairs, in the master bedroom, the couple’s storage-concealing Flou bed faces a 15-foot-long closet whose contents are concealed by a swath of sea green fabric that looks lovely when illuminated from within. A few steps away, Dulkinys’s “dream bathroom” was carved out of the side of the hill by a Bobcat and is equipped not only with the aforementioned Philippe Starck soak-ing tub but also a steam-emitting shower spa. A washer and dryer are tucked into the adjoining utility room.

Because the house affords so many opportunities to manipulate light—especially at night, when the dining area is framed by the softly glowing scrims—the architects have dubbed this the Lantern House. Unlike in a typical large, open-plan room, these changing layers of transparency and intimacy have the desirable effect of making the house feel both larger and moodier, and skylights over the sitting room and dining area—what Holey jokingly calls the “great room”—create an aura of openness. Says Spiekermann, “You know, not every architect understands how to bring in light without creating unwanted visibility. We have our privacy, but the house is not dark.”

The space also gains stature from restraint. Instead of a hodgepodge of finishes and details, a few materials—full-slab Carrara marble, walnut floors and cabinets, and white walls—are used throughout, almost monolithically. When the glass doors at the back of the kitchen are fully unfolded, the kitchen floor seems to flow seamlessly into the slats of ipe wood on the deck, making the house feel that much longer. It also helps that Dulkinys and Spiekermann are not packrats. With two apartments in Berlin (one used as a library) and two offices, Dulkinys says, “we have enough other places to stash our stuff.”

As for the neighbors, after all the Sturm und Drang, the construction actually ended up helping them, seismically speaking, when a concrete retaining wall was poured to frame the new energy-absorbing mat slab foundation. Says Spiekermann, with perhaps a soupçon of irony, “We’re helping to shore up the neighborhood—real air raid shelter material! This is definitely where you want to be in an earthquake.”

More than half a decade elapsed between the purchase (December 1998) and house--warming (November 2004) of Dulkinys and Spiekermann’s hillside house. When architect Nilus de Matran’s trilevel plan for a modern makeover (above, 2001) came up against the obstructionist politics that defines construction in San Francisco, the house sat in limbo until architects Chris Wendel and John Holey devised a less radical renovation that involved a lot of excavating but preserved much of the house’s original demeanor.