One of the things that a house less than four cannot do is combine two cities to consider them as one for T'Chumim.
[Background: Someone lives in a city, the whole city is considered like four Amos and you may walk a complete 2000 Amos from the end of the city. R' Meir says even the first 70 and two third Amos is considered the outskirts of the city and you only count the 2000 Amos after you leave the outskirts. The Rabanan hold that you only count the 2000 Amos from the end of the city. The Rabanan agree that if there are two cities next to each other, you can combine them if there is only a Shiur of the outskirts between them. R' Huna says we give an outskirt for each city. Therefore if there is 141 and a third Amos between them we can consider them as one city. Chiya b. Rav says that you only give one outskirt for both of them, therefore only if there is 70 and two third Amos between them do we consider it as one city.]
Tosfos asks why does the Braisa say that the house doesn't combine two cities? If the two cities are within the prescribed Amos of each other (each one to their Shita) then why would you need a house to combine them. If they're not, and therefore you need this house to extend one city so it will be now within the prescribed Shiur, so why use a case of combining cities? Why not use a case of one city? If the house is within 70 and two thirds Amos of the city, if it's not four Amos, the city is not extended until there.
Tosfos answers, that the Rashbam had a Girsa that such a house cannot extend a city (not combine cities.) This Girsa is also in the Yerushalmi.
Rabeinu Tam answers in keeping to our Girsa. We're referring to a case where the house is within 141 Amos and a third from the city. When we say this Shiur combines two cities, it doesn't mean that both sides must be an actual city. Rather, if one of them is a city then the other side could be a house. The only reason the Mishna said two cities, to be even with the term of R' Meir that gives 70 Amos to one city, so it says the Rabanan disagree with one city but agrees with two cities.
According to Chiya b. Rav you anyhow need to say that the two cities don't have to be cities, because 70 Amos would combine two houses. If it wouldn't, then what would we say (by a non walled city) makes individual houses into a city? We must say as long as all the houses is within 70 Amos of each other we'll consider them all together as a city.
Although to Chiya b. Rav you must say that individual houses and cities have the same Halacha, but according to R' Meir and R' Huna it doesn't. For R' Meir, we wouldn't give to an individual house 70 Amos before starting his T'Chum and to R' Huna we wouldn't give to two houses 141 Amos. Only if one side is a real city would we give 141 Amos to combine it to an individual house.
The Gemara wanted to say that this Braisa, that a house needs to have four Amos to be a house, is like Rebbe that says a Sukka needs to be four Amos squared. But to the other Shitos, a house can be 7 T'fachim, the Shiur of a Sukka.
The Gemara retracts and says that it's like everyone. They only argue in regards to Sukka which is only a temporary dwelling. But a permanent dwelling of a house needs to be at least four Amos squared.