Their task is to draw up plans for the development of a five-acre brown- field site near Bishopsgate in the centre of London, with homes for both rich and poor alongside shopping and recreational facilities.
The Foundation is looking for designs that will provide affordable, environmentally friendly homes in one futuristic swoop.
The competition has been endorsed by the Government's Urban Task Force, which has championed the idea of an urban renaissance to counteract the anti-city sentiments of many Britons, and which reports next month.
Brown-field sites tend to be viewed as costly and often not particularly desirable alternatives to green-field development.
However the Architecture Foundation hopes that its British Steel-sponsored competition, Living in the City, will act as a catalyst to rework public notions of what city living can be.
Instead of commuting, congestion and cramped accommodation, the organisers see the need to create self-contained and compact communities that are not only eco-friendly in design but also reduce the environmental problems caused by new building in the countryside.
The Peabody Trust, a London housing charity which is collaborating in the competition, is already pioneering small-scale developments for people of all ages from a range of socio-economic backgrounds.
They include pre-fabricated modular homes assembled on site, a zero-energy development of an old sewage works with glass roofs, solar panels and recycled bathwater, and the conversion of a former British Telecom depot in Newington Green, north London, into flats for shared ownership and rent, with a health centre and cafe.
However, according to the charity's director of development, Dickon Robinson, the Railtrack competition site at the Bishopsgate Goodsyard, near Liverpool Street, provides a rare opportunity to come up with large-scale plans for central London.
Kathryn Firth, the competition co-ordinator, is keen to get away from the approach of viewing homes according to the number of bedrooms they have. "We are looking at lofts that combine living and working space and the introduction of flexible partitions so that units can be adapted for changes of use or different sizes of family unit," she said.
Another idea is to transform the use of public and private space with "vertical gardens" of balconies and courtyards part-way up buildings and rooftop terraces.
Environmental damage is expected to be minimised through shared services such as laundrettes and rooftop creches, recyclable building materials and the harnessing of solar and wind power.
"When we are asking people to give up their house and garden we have to be able to offer them something exciting,'' said Mr Robinson. "People used to say the great thing about London was its squares and parks, and if that can be transformed into a vertical form it will change the image and feel of the urban environment.''
Because of the huge pressure on housing in London, from East Asian investors at the top of the market through to asylum-seekers, the organisers believe it is crucial to show how a mixed-income development could work successfully.
Although Railtrack is unable to guarantee that the winning design will be developed on its site, the four finalists will each receive pounds 5,000 to develop further their proposals with international design teams.
The winners will be displayed at the Design Museum in London in January.Reuse content