How New York's Basement Apartment Legalization Actually Works

New York City has opened two different regulatory doors for basement apartments, and they lead to different places. One lets homeowners build a brand-new accessory dwelling unit almost anywhere in the five boroughs. The other lets owners of apartments that already exist, often illegally, apply for a path to legal status. A unit that qualifies for one program does not automatically qualify for the other.

Both efforts trace back to the same problem: city officials have said thousands of New Yorkers live in basement and cellar units that were converted without permits, often lacking basic safety features. The rules adopted over the past two years are the city's attempt to bring some of that housing into the legal system rather than eliminate it.

Two Separate Legalization Tracks

The first track is City of Yes for Housing Opportunity, a citywide zoning text amendment. It began public review in April 2024, was approved by the City Planning Commission that September, and was adopted by the City Council on December 5, 2024, by a vote of 31 to 20, according to coverage of the vote by Queens Daily Eagle. The plan is intended to add 80,000 homes over 15 years, a figure that was revised down from initial estimates of 50,000 to 109,000 units after modifications made during the review process.

The second track is narrower. Local Law 126 of 2024 created a program called the Authorization for Temporary Residence, or ATR, aimed specifically at basement and cellar apartments that already exist. The city's Department of Buildings describes this as a pilot program, not a citywide right, and it applies to a limited set of neighborhoods rather than the whole city.

Building A New Accessory Dwelling Unit

Under City of Yes, an accessory dwelling unit, or ADU, is defined as 800 square feet or less, located on the same lot as a one- or two-family home, according to the Department of City Planning's own guide to the rules. ADUs can take the form of backyard cottages, garage conversions, basement apartments, or additions to an existing house, and they can be created from existing space or built new.

The rules are not the same everywhere. Basement and detached ADUs are barred from an expanded flood area covering the 2050 and 2080 flood plains, the planning department's guide states. Detached ADUs are also barred from historic districts and from some low-density "contextual" zoning districts unless the lot sits within a designated transit zone. Homeowners must live at the property to build an ADU there.

Parking requirements also vary by location. The plan created three zones: one where parking mandates are eliminated entirely, including Queens Community Districts 1 and 2; a second where requirements are reduced; and a third where existing parking rules stay in place, according to reporting on the plan's provisions.

The city opened an application portal for new ADUs on September 30, 2025, according to a Department of Buildings announcement. Homeowners can apply through the DOB NOW: Build filing system to construct basement apartments, attic apartments in one-family homes, or backyard cottages, and can choose from a library of pre-approved designs intended to speed up the filing process.

Legalizing An Apartment That Already Exists

The ATR pilot works differently. To qualify, a basement or cellar apartment must have existed before April 20, 2024, and the owner must apply by April 20, 2029, according to the Department of Buildings. Eligible units must already have smoke alarms, gas detectors, central heating, adequate egress, and separation from boiler equipment. Properties in flood-prone areas are excluded.

Geography matters here too. The pilot is limited to specific community districts: Community Districts 9 through 12 in the Bronx; 4, 10, 11 and 17 in Brooklyn; 2, 3 and 9 through 12 in Manhattan; and Community District 2 in Queens, according to the city's proposed rule published through the NYC Rules portal. Staten Island is not included.

Once accepted, an owner has up to 10 years to bring the unit into full compliance, including installing sprinklers and flood water sensors, while tenants remain in place under milestone deadlines set by the city. The Department of Buildings and Department of Housing Preservation and Development held public hearings on the proposed rules on December 11 and December 12, 2025.

The proposal has drawn criticism from housing advocates, who argue the Department of Buildings is requiring more upfront work than the underlying law intended. Comments on the proposed rule state that the department's draft calls for full design drawings and fully compliant kitchens and bathrooms before approval, rather than allowing those upgrades during the compliance period, and that this discourages participation among the lower-income homeowners the program is meant to help.

The Grants Behind The Conversions

Money for these conversions runs through a separate state program, Plus One ADU, administered by New York State Homes and Community Renewal along with local partners including the city's Department of Housing Preservation and Development. The program launched its pilot phase on November 21, 2023, and is funded at $85 million over a five-year housing plan, according to the state housing agency.

As of a May 2024 announcement, the state had awarded nearly $60 million toward roughly 500 accessory dwelling units across two funding rounds, with a third round to follow. Grant caps differ by location: up to $125,000 per unit outside New York City, and up to $175,000 per unit inside the five boroughs, according to the state's announcement.

Homeowners must generally earn no more than 165% of area median income to qualify, with priority given to those at or below 120%, and must be owner-occupants who are current on any existing mortgage and have no outstanding municipal arrears, according to the city's HPD program page. That page also notes that as of mid-2026, intake for the program was closed, with the agency still processing eligibility for properties already submitted.

What Still Stands In The Way

Even with the zoning changes in place, City of Yes opponents have signaled they may pursue legal challenges to the plan, according to reporting on the December 2024 vote. Council members from Queens split nearly evenly on the vote, with some warning the changes would alter the character of low-density neighborhoods.

For homeowners weighing whether to use either program, the practical distinction is straightforward: an entirely new basement, attic or backyard unit falls under City of Yes and the DOB NOW application portal that opened in September 2025, while an apartment that has been occupied, however informally, since before April 2024 falls under the ATR pilot, and only if it sits within one of the eligible community districts.