There is a new building on Capitol Hill that is so exemplary in one sense, and so unfortunately outdated in another, that it sent me to the dictionary in search of definitions.

As it turns out, the building, a mixed-use structure in the middle of an attractive commercial block opposite Eastern Market, perfectly suits the first meaning of the word exemplar: one that serves as model or example. The building shows us the way things could, and should, be done in many areas of the city.

But there is a second definition: a typical or standard specimen. Ironically, the building is the wave of the past insofar as the second meaning of exemplar is concerned. It is the way things used to be done all over town. After decades of boom-and-bust office development, we are just beginning, almost accidentally, to relearn some important lessons.

At first glance the building at 218 Seventh St. SE, designed by Richard Ridley and Associates, is simplicity itself. A four-story structure with a half-basement level, it accommodates shops (on the first three levels) and apartments (on the top two floors).

This is the familiar, age-old urban pattern of people living in the midst of commercial activity, which was celebrated with such clearheaded passion by Jane Jacobs two decades ago in her book, "The Death and Life of Great American Cities"--the bible of mixed-use planning.

And yet here we are in Washington, 20 years into the post-Jacobs era, making things extremely difficult, if not impossible, for landlords, developers and architects to do what used to come naturally.

Many of the reasons are economic. Office space is so easy to build, and so profitable compared with retail, and especially residential space, that developers are unwilling to take the risks. Dana Danielson, the developer of 218 Seventh St., who also served as his own general contractor on the job, says he put the small residential units on top simply because he wanted to. "I just like the combination," he says, "but it is a financial disaster."

That is plain enough, but it is a shame. Unfortunately, the city's zoning codes and building regulations make it easier for large-scale than small-scale developers, and financial institutions look more favorably on big and unimaginative commercial projects than on smaller, more creative efforts.

The good news is that the situation is slowly improving. This is a silver lining by default: As the city fills up with big office buildings and hotels, it is becoming harder to put big land deals together. "More and more of these smaller, in-fill projects are popping up," Ridley says. "It is becoming more and more competitive to develop the leftover sites on commercial streets all over the city."

Ridley's Capitol Hill project (he was assisted in the design by Jon Lourie, project architect) is a good example of the ingenuity required to get this kind of job done. The architects began the project with a few things going for them: an unusual client who lives in the neighborhood, and thus cares about it; a terrific street in a historic district where land parcels are small and ownership stable; and a mixed-use zone that, if far from perfect, does encourage some residential construction. They also had a coherent design philosophy--and patience.

The zoning code would have allowed an incongruous 50-foot-high box on the site. Instead, the architects placed a two-story entrance at the building line and then stepped back in five stages to the roof line--a simple but effective tactic that adds visual interest to the building while disguising its comparative bulk. This design also made room for an attractive apartment balcony overlooking the street.

A major problem was circulation. Conventional economic wisdom these days says you don't give up valuable commercial street frontage to create a separate entrance stairwell for apartments on upper floors. The architects managed a nifty solution by making the stairwell a focal point of the design, usable by shoppers and apartment-dwellers alike. The street-level fac,ade, in effect, is all entranceway: when you get close to the building, it opens up invitingly.

A careful reading of the zoning code and building regulations helped, too. Ridley discovered that by converting the existing basement into a store he could increase the density of the building with no penalty. He also found that by designing the walk-up, one-bedroom apartments as split levels, each with a main floor and a mezzanine, he could legally avoid the requirement for an extra fire stairwell, which would have taken up much-needed space and, not incidentally, ruined the design.

"And we installed sprinklers throughout the building," Ridley says. "It was expensive but worth it. The fire people loved it. Basically it just took a lot of patience to sit down and talk with the officials involved--the fire marshal, the street engineer, the code administrator. We talked to each of them individually and then brought them together, and we ended up with something that was legal and safe."

They also ended up with quite a large building that stands modestly on the street and manages to serve several masters at once: storekeepers, shoppers, passers-by and residents.

The success of the design depends less upon style--though the brick fac,ade and half-oval arches pick up the masonry materials and motifs of Adolph Cluss' estimable Eastern Market across the street--than upon the clarity and ingenuity of planning for both the inside and the outside of the building. If the design falters in some details--Danielson's homemade slab marble keystones, for instance, look rickety, and the California warmth of the interiors seems a bit overdone--the new building on Seventh Street deserves careful study, and emulation.