Enclosure surrounds excessively small house (7)
I believe the answer is:
cottage
'small house' is the definition.
(I've seen this before)
'enclosure surrounds excessively' is the wordplay.
'enclosure' becomes 'cage' (cage is a kind of enclosure).
'surrounds' means one lot of letters goes inside another.
'excessively' becomes 'OTT' (short for over the top).
'cage' going around 'ott' is 'COTTAGE'.
(Other definitions for cottage that I've seen before include "Small home" , "Small single-storey dwelling" , "Country residence" , "Country dwelling" , "simple accommodation" .)