Here’s How to Turn Your Basement into a Legal Apartment

Some basements are suitable only for storage and laundry. Others can be finished and provide valuable added living space to a home. Still other basements are worthy of being homes on their own. But to fit in that latter category as a legal apartment, your subterranean space has to meet some very important minimum requirements first. 

“Cities generally mandate laws on what constitutes a ‘legal’ dwelling in order to protect the safety of the occupants,” says Sally Hamidi, president and principal broker of Citylights Realty Group. The cities then issue licenses to the homeowners so that they can legally rent the separate dwelling. In New York, for example, a certificate of occupancy confirms that a residence complies with all safety regulations and is therefore habitable. While your own city or town’s local building codes might differ in precisely what makes a space safe to live in, here’s what you need to do to ensure your basement apartment is legal before you rent it out:

The International Residential Code (IRC) sets the standards for living spaces. It stipulates that a room, other than the kitchen, must have a minimum of 70 square feet of space for it to be deemed habitable. This doesn’t apply to the full space of a studio apartment, though, so you must abide by any minimum square footage requirements for apartments set by your local building codes. The IRC’s minimum ceiling height for habitable basement space — that is, space for living, sleeping, eating, or cooking — is seven feet. Bathrooms, which are not considered habitable space, must have ceilings no lower than 6 feet 8 inches. Again, these are minimum requirements by the IRC; local code might dictate otherwise.

A legal basement apartment must have its own door to the outside. It’s not just for convenience — it’s for safety. Basement apartment inhabitants must have the ability to get out of the space in case of fire.

Windows provide much-needed ventilation for a basement apartment, but they also need to be positioned as an egress. In New York City in particular, the Department of Housing Preservation and Development mandates that the bottom of the yard or the street can be no higher than six inches below the window sill of any window. Window size guidelines will also apply, so homeowners should check with local codes to maintain compliance.

Basements are prone to moisture even outside of any flooding that can occur in extreme weather. Walls must be damp/waterproofed up to the height of ground level should it be determined that subsoil conditions warrant it.

Keep in mind that these are minimal requirements for a basement apartment to be rented. A basement space might still be considered liveable even if it doesn’t have a separate entrance, but it can only be inhabited by someone who is already part of the household, not a paying tenant. Landlords in breach of basement apartment regulations can find themselves in a world of trouble. 

“Basement apartments that do not comply with applicable laws, regulations, and codes are a hornet’s nest for owners,” says Mary Hall Mayer, an agent with Coldwell Banker Warburg in New York. “[The owner would] face legal consequences as well as financial issues if the illegal apartment creates a default of mortgage or other terms.”

Particularly in big cities where there is a shortage of affordable housing, basement apartments are seen as a way of alleviating the housing crunch — but only if they are safe for tenants.

“Homeowners wishing to convert their basements into separate dwellings should conduct a feasibility study with a licensed general contractor to see if the unit can easily meet the city requirements,” Hamidi says. 

While a basement apartment conversion could turn out to be a viable revenue stream for a homeowner, it requires a hefty investment to get it there. Hamidi says it can cost anywhere from $30,000 to upwards of $100,000 depending on the complexity of the work and the cost of materials. 

But if you’re not willing to put in the time or money to convert your basement to a legal apartment, then you’ll need to find another way to grow your real estate portfolio. It’s just not worth the risk for your tenants or your bottom line.