In the east London district of Whitechapel, where the luxury developments of the UK’s richest are gated by the graffiti of the UK’s poorest, lies Darbishire Place. This estate, dating back to 1870, has all the hallmarks of low-cost social housing: barrack-like exteriors, washing lines on each balcony, a playground occupied by children 10 years older than the age group it was intended for. Yet one of its buildings is in the running for the highest architectural accolade in Britain and Ireland: the Riba Stirling Prize. If successful, it would be the first social housing project to win the prize.

You might need to look hard to spot the nominated building, whose unassuming nature its architect acknowledges. “It’s the simplest low-cost housing you can do, so I’m slightly surprised to find it within the high altitude of the Stirling Prize,” Niall McLaughlin says.

The architect, who moved to London in the mid-1980s, after graduating from University College Dublin, has been nominated for a Stirling prize before. In 2013 his Bishop Edward King Chapel, at a theological college near Oxford, was the favourite to win, but it didn’t. So this time around, with competition from the illustrious Rogers Stirk Harbour + Partners practice and his fellow Irish architects Heneghan Peng, he’s taking the nomination itself as the prize.

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“I feel more relaxed about it this time,” McLaughlin says in his Camden office. “I want to use the opportunity to promote the idea that good architecture can make good low-cost housing. We’ve designed a building that hasn’t come out all guns blazing, looking extraordinary and weird: this is a quiet project to show how good design can improve the lot of people who don’t have access to it very often.”

At first glance McLaughlin’s building looks like its neighbouring structures, as it was designed to, but the devil is in the detail. Take the feeling of thick, sturdy walls. In fact it’s an illusion created by setting the windows inwards and protruding the window frames outwards. Or the inset balconies. (“We’re cave-dwellers,” McLaughlin says, “and we like to sit outside, with our back and our sides protected, in a position where we can see other people, but they can’t see us.”) The unconventional site, a strip of land unused since the building that stood on it was destroyed during the second World World, was exploited to make some of the13 flats triple-aspect.

Inside, McLaughlin has ignored the trend of open-plan kitchens and living rooms; some of the flats have closed-off kitchens, to take account of cultures that don’t cook in their living spaces; most of the residents of Darbishire Place, which is run by the huge Peabody housing association, are Bengali.

The building’s stairwell is a touch of genius. Housing-project stairwells are all too often harsh, unpleasant spaces. Here it is open and brightly lit, with acoustics engineered for a warm feel, so residents “aren’t rushing past each other on the stairs but meeting each other in a state of civil decorum”, McLaughlin says. “There are funny technical things we did, like we adjusted the floor-to-ceiling heights, so you could get away without having a half-landing on the stairs, and using the space we gained to create lobbies where people could leave scooters and prams – the things that you don’t have space for in a house but you want to dump before you open the door.

“The first time I designed low-cost housing I was a younger architect, and it was all about the facade and making it look interesting. Now I’ve had kids I think about it in a very different way: ‘Okay, I’ve got to the door with the baby, the shopping and the keys. What do I put down, and in what order?’ ”

“Our children say things like ‘innit’ ”

McLaughlin and his family – his wife, Mary, and their children, six-year-old Diarmaid and four-year-old Iseult – live in Kentish Town, although they return to Ireland regularly. Is it on his mind to move back?

“My wife and I think about it more now we have children and they start saying things like ‘innit’. They’re going to turn into little Londoners,” he says. “I was wondering if it was better to be brought up in London and always be an insider, or is it better [for London to be] the place you go when you want to free yourself and make yourself up as you go along. I had that opportunity, and it’s been a happy place for me to thrive in.”

When he started his practice, 25 years ago, he worked from his one-bedroom flat on Portobello Road. His first job was an attic conversion for a couple he met on a night bus. Eight years later he was named Young British Architect of the Year; after it came a Riba European Award for the Orchard Day and Respite Care Centre in Blackrock, Co Dublin, and an American Institute of Architects Award for student accommodation for Somerville College, in Oxford.

McLaughlin cites his move to London as the beginning of his career proper. “I recently had to do a piece about how Irish people constructed London, but the piece I wrote was how London had constructed me, in a way – in a way that didn’t feel possible in Ireland. You were able to set out your own stall and put ideas forward completely in your own terms, and no one was asking, ‘Why are you doing that?’ They’d say, ‘Off you go.’ I keep making it up as I go along, and people keep thinking it’s interesting.”

He points to a model of Avenham Park Pavilion, in Preston, and explains how its design reflects both the town’s former cotton industry and its status as the wettest in England. If anyone considers architecture a dull subject, 20 minutes in McLaughlin’s company should be prescribed.

Place of learning

While he awaits the result of the Stirling Prize, which Riba – the Royal Institute of British Architects – will announce on October 15th, his new venture is to turn his practice into a place of learning, so that his architects spend a proportion of their working hours pursuing research projects. And, surely, they’ve been busy fielding interest after their second Stirling nomination.

“When we were shortlisted I thought lots of the people who provide low-cost housing would contact us, but actually property developers contacted us,” he says. “I think it’s because those who provide low-cost housing aren’t really interested in providing good design, while property developers can see there’s an advantage to it.”

I suggest that social-housing providers might find the cost prohibitive, but McLaughlin disagrees. Darbishire Place falls in line with the average for social housing in London, at £1,870 (€2,600) per square metre.

“You’d probably end up paying your architect more money, but a good architect will save you money on the way, because they’ll find ways of doing something well or that is easier to maintain,” he says. “People always say they can’t afford good architecture. I’d argue that they can’t afford bad architecture.”

RIBA STIRLING PRIZE Also on this year's shortlist

Burntwood School, London

, by Allford Hall Monaghan Morris: A modern take (above) on the 1950s-style school that came before it – Leslie Martin’s assembly hall still stands – the six sets of teaching blocks blend aesthetics with functionality, providing students with a light-filled place of learning.

University of Greenwich Stockwell

Street building, London, by Heneghan Peng: The second Irish entry comes from Heneghan Peng, also responsible for the Giant’s Causeway visitors’ centre. The university buildings features a Crit Pit, where students make presentations, but its real centrepiece is its expansive roof terrace. Equal to the size of 12 tennis courts – making it one of the biggest in Europe – it features a wetland and climate-controlled greenhouses.

Maggie's Lanarkshire, Scotland, by Reiach and Hall Architects: At a cost of €2.5 million, this cancer-care centre (above) is the cheapest project on the shortlist – but easily fulfils its aim of being a place of calm and restoration. The building is defined by its courtyards and walled gardens, fenced by lattice-style brick walls.

Neo Bankside, London, by Rogers Stirk Harbour + Partners: RSHP (formerly the Richard Rogers Partnership) already has two Stirling Prizes, for terminal 4 of Madrid airport and a Maggie's centre in Hammersmith, and its eye for the spectacular continues with these luxury apartments that put everything on show – even the building's skeleton.

The Whitworth, University of Manchester, by Muma: Described as the Tate of the north, this €20 million development opens art to all with an inviting design. Such is its effect that since its reopening, in February, more than 230,000 people have entered its doors – a record for the gallery.