One hundred years since the 1919 Addison Act paved the way for the country’s programme of mass council housing, the prize for the best new building in the UK has been awarded to one of the first new council housing projects in a generation.

Goldsmith Street in Norwich represents what has become a rare breed: streets of terraced homes built directly by the council, rented with secure tenancies at fixed social rents. And it’s an architectural marvel, too.

The housing estate is comprised of almost 100 ‘ultra low-energy homes’. Photograph: Tim Crocker/Riba/PA

“A modest masterpiece” is how the RIBA Stirling prize judges described the project, designed by London firm Mikhail Riches with Cathy Hawley, representing “high-quality architecture in its purest most environmentally and socially conscious form”. The 105 creamy-brick homes are designed to stringent Passivhaus environmental standards, meaning energy costs are around 70% cheaper than average. The walls are highly insulated and the roofs are cleverly angled at 15 degrees, to ensure each terrace doesn’t block sunlight from the homes behind, while letterboxes are built into external porches, rather than the front doors, to reduce any possibility of draughts.

Immense thought has gone into every detail – from the perforated brick balconies to the cleverly interlocking staircases in the three-storey flats at the end of each terrace – to ensure that every home has its own front door on the street. The back gardens look on to a planted alley, dotted with communal tables and benches, while parking has been pushed to the edge of the site, freeing up the streets for people, not cars.

“This is an incredibly proud moment for Norwich,” said councillor Gail Harris, cabinet member for social housing. “Winning this prestigious award shows that it is possible to build fantastic new council homes, despite the challenges posed by central government cuts and restrictions around right to buy receipts.”

Current rules mean that councils can only use receipts from council homes sold through the contentious right to buy policy to cover just 30% of the cost of new homes, with a tight three-year limit in which to spend it. Goldsmith Street was funded by a mix of borrowing, council reserves and right-to-buy receipts, but Harris said they could do so much more if the right to buy was reformed.

The street won the annual Stirling prize ahead of a field of nominees including a house built from cork in Berkshire and a ‘hi-tech and futuristic’ distillery in Scotland. Photograph: Tim Crocker/Riba/PA

The architects won the original competition because they were one of the few firms to propose streets, rather than slabs of apartment blocks. They took inspiration from the city’s Golden Triangle, a desirable neighbourhood of Victorian terraced houses, where the streets are laid out more tightly than modern overlooking regulations would allow. The architects used this precedent to argue that their new neighbourhood could be just as humanely scaled, while fitting in more homes.

Marking the first time in the 23-year history of the Stirling prize that it has been awarded to social housing, the project beat stiff competition from the revamped London Bridge station, an opera house in a former stable block, the Macallan whisky distillery in Scotland, a visitor centre for the Yorkshire Sculpture Park, and a house made entirely of cork. The decision represents a welcome contrast from last year’s winner, Norman Foster’s £1.3bn headquarters for Bloomberg, which involved importing 600 tonnes of bronze from Japan and a quarry-full of granite from India, while claiming to be the most sustainable office building ever conceived.

This year’s choice sends a clear message that, despite government cuts, it is eminently possible for brave councils to take the initiative and build proper social housing. With a recent survey suggesting that more than two-thirds of local authorities are directly engaged with delivering housing again, through a variety of methods, there may come a time when projects like Goldsmith Street are not an anomaly.