Basement apartments provide affordable housing options in crowded urban hubs like New York City, where the average rent for a Manhattan apartment is $4,140, according to RENTCafé data. But far too many unregulated units create hazardous living conditions.
A recent report compiled by The Pratt Center for Community Development found more than 30,000 “unaccounted-for” apartment units in New York City. This means that the Department of Buildings did not grant any of them a certificate of occupancy, which declares that a residence is in compliance with the building code and is therefore habitable. That the vast majority of these illegal apartments were found to be in low-income communities of color is further evidence of the housing divide that plagues many cities.
When residential real estate is off the radar, it can lead to tragic consequences. During last year’s Hurricane Ida, basement flooding in New York City resulted in the deaths of 11 residents who were trapped in their illegal basement apartments.
The requirements for legal basement apartments
If you own a residence with a basement or are looking to purchase one as an investment property, you should know that even the most impeccably finished subterranean spaces do not always make for a legal residence. While local building codes and zoning laws vary, here are some of the basic requirements your basement must meet before you can rent it out:
A separate entrance. Your basement apartment must have its own entrance to the street or yard. It’s not just about privacy for you and your tenant — it’s about providing a safe exit in an emergency.
An egress window in every room. Basement apartment windows permit natural light and ventilation in what can be a dark, stuffy space, but they also need to be large enough and accessible for egress. The International Residential Code (IRC) has strict specifications for basement apartment windows, including:
- The bottom of the window can’t be higher than 44 inches from the finished floor.
- The window must open at least 24 inches high and 20 inches wide.
- The window’s net clear opening must be a minimum of 5.7 square feet (5 feet for floor-grade or below-grade openings).
- The glaze area must be at least 8% of the total floor area of the space to allow for enough natural light.
- The window must have an opening no less than 4% of the total floor area of the room for proper ventilation.
If your basement apartment is divided into separate rooms, each sleeping room must have a window of its own to make it habitable. This is not much different from rooms on the ground floor and above — you can’t count a room as a bedroom if it doesn’t have proper egress.
Minimum room size. The IRC says that all habitable rooms (excluding the kitchen) must be a minimum of 70 square feet. But keep in mind that housing codes vary by region and that the IRC standards are the bare minimum for individual rooms, not a single-room studio apartment.
Minimum ceiling height. Basement ceilings are typically already lower than those throughout the rest of the residence; however, your basement can’t have one lower than 7 feet if you want to rent it out as an apartment. Basement bathrooms can have ceilings as low as 6 feet, 8 inches, according to the IRC.
Dampproofed walls. Basement flooding is a problem even if the space is only used for storage. But when a below-ground level will serve as someone’s home, care must be taken to keep out moisture. For example, New York City landlords must ensure that their walls are dampproofed up to ground level if an inspection of subsoil conditions warrants it.
So is it worth it?
It can be a pricey undertaking to bring a basement up to code, depending on the amount of work that needs to be done. According to HomeAdvisor, which is owned by Angi, property owners will pay an average of $61,000 to convert a basement into a studio apartment with a kitchenette, bathroom, and laundry area; it will cost around $63,000 to make it a one-bedroom apartment. Adding a kitchenette alone costs an average of $45,600, though you can trim that down if there’s already plumbing and wiring installed. If you need to add a separate entry and choose high-end appliances and finishes, the price tag can rise to over $100,000.
The great thing about converting a basement to an apartment is that you don’t have to worry about searching for a new property or building an addition. Depending on what rents are in your area, it could be money well spent. But it’s also money that must be spent, as there is so much more at risk than your bottom line when renting out an illegal basement apartment.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.