A 37-acre new town called Barbican is thriving in the heart of London.

Surrounded by commercial districts, the 6,500-resident community was begun in 1957, when the city's housing minister proposed that the bombed-out site be developed as "a genuine residential neighborhood, incorporating schools, shops, open spaces, and amenities -- even if this means foregoing a more remunerative return on the land."

The new town has more than 2,000 apartments in three 43-story towers and a series of terrace apartment blocks seven stories high. Finishing touches are currently being added to the Barbican Arts Center, new home of the Royal Shakespeare Company and the London Symphony Orchestra.

The City of London Museum, a popular tourist attraction, is also located there, as are a girls' school and the Guildhall School of Music and Drama.

Despite the development's high density -- about 230 people per acre -- nearly two-thirds of the total acreage is devoted to open space. No cars are allowed within the area, although there is an underground parking garage, and the open skyways linking the towers and apartment blocks keep most foot traffic in sight of but above the well-tended and landscaped areas.

Barbican's success is one indication of the pressures on London's housing market. Shortages of land, fierce rent control and stringent tenants' rights legislation, changing life styles and foreign investment have all combined in London to make housing the very dearest of commodities.

The familiar "gentrification" of close-in neighborhoods and escalation of real estate prices have hit London hard, and any visiting Washingtonian would feel right at home after glancing through the real estate pages.

Homes are being converted to flats for sale, Victorian buildings are getting extensive facelifts and house prices are a frequent topic of conversation here.

The concept that lead to Barbican was not like that of the ill-fated American new-town-in-town movement. It called for the juxtaposition of people and commercial and office facilities to create an "instant community" in the heart of the city. Like American designers of in-town development, Barbican's planners wanted to attract and retain a middle-income professional class in the city.

While American in-town development has often hinged on slum clearance and urban renewal, the land for Barbican had already been cleared -- by German bombers during World War ii. The development was financed, overseen and directed by the City of London Corp., a public body that has governed the mile-square City of London business and financial district since the 9th century.

Those advantages, cleared land and public control, seem to have made a real difference.

The development is an imposing collection of multi-storied apartments that enclose green fields, ponds and archeological ruins -- it was once the site of a Roman fort and, later, a market center.

Skywalks, built like loggias, connect the wings of the development above ground, and link it with the buildings of the financial district.

David Amies, Barbican general manager, says the development is fully rented, with rents ranging from around $200 per month for efficiencies to nearly $2,000 a month for the very largest apartments.

Most tenants are professional people who work in the nearby financial district. They pay an average rent of about $500 a month. There is a one-year waiting list for new tenants.

But despite this, the development is still losing about $6.6 million a year while servicing an interest burden of $11 million a year on the land and buildings. (Total capital investment in the housing development totals $110 million.)

"We view the development as a capital asset that's appreciated far beyond what it cost us to acquire and develop," Amies said. "Still, there's some sentiment to sell it off and stop the drain, even though we expect the development to be self-supporting within 10 years."

The pressure to sell the apartments and end the City of London's involvement in Barbican isn't coming solely from budget-conscious taxpayers, however.

Many of the tenants, trapped in a superheated real estate market, and living in some of the most convenient and attractive housing in the city, are pushing for the development to "go condo."

In British terms, this would mean 99-year leases, but the effect would be the same, to take the housing out of the rental market and allow residents to capitalize their investments and take advantage of Britain's tax laws, which are similar to ours with respect to mortgage interest deductions.

Amies has retained a consultant to gauge the financial costs and benfits of the move.

Strolling through the grounds at dusk, it was easy to see why the current residents want to stay. Excavated portions of a Roman wall bisected a loggia path, and as we spoke with a happy tenant -- bowler and rolled umbrella in place -- a family of rabbits emerged from a thicket to graze on the grass. Nearby, the bells of St. Paul's Cathedral tolled sonorously.