How to Legalize a Basement Apartment in NYC Under Local Law 126

A step-by-step breakdown of NYC's Local Law 126 pilot process, published by Joseph Ranola on May 22, 2026. ranolarealestate.com.

Nobody has an official count of New York City's illegal basement apartments, but the estimates run high: housing advocates put the number of basement units at more than 100,000, and the city's Block by Block housing plan cites estimates that over 100,000 New Yorkers live in illegal basement apartments. For decades, the only path to making one legal required a full gut renovation, which most small homeowners could not afford and which usually meant displacing a tenant for years. That changed in December 2024 when the city passed Local Laws 126 and 127 as part of the City of Yes for Housing Opportunity initiative. Local Law 126 is the one homeowners with existing basement tenants care about: it creates a 10-year path to bring a pre-existing unit up to code while the tenant stays put and you work toward a certificate of occupancy without a single-year gut-and-vacate.

Who qualifies for the Local Law 126 pilot

Three things need to be true. First, the basement or cellar apartment must have been occupied before April 20, 2024. This is a legalization program for existing units, not a shortcut for new construction. Second, the property must be located in one of 15 eligible community districts: Bronx districts 9, 10, 11, and 12; Brooklyn districts 4, 10, 11, and 17 (Bushwick, Bay Ridge, Bensonhurst, and East Flatbush); Manhattan districts 2, 3, 9, 10, 11, and 12; and Queens district 2 (Long Island City, Sunnyside, and Woodside). Staten Island is not included in the current pilot. Third, the property cannot be in a FEMA-designated flood zone. Properties in Special Flood Hazard Areas, coastal zones, and mapped rainfall-risk zones are excluded.

If your property is not in one of those 15 districts, Local Law 127 and Appendix U of the NYC Building Code still apply to you citywide. Any owner of a one- or two-family home can build a new legal basement apartment, attic conversion, or backyard cottage as long as the project meets the building code requirements from the start and goes through the standard DOB permitting process.

The ATR application: what it takes and what it buys you

If your property qualifies, the process starts with filing an Authorization for Temporary Residence (ATR) through the Department of Buildings' DOB NOW: Build portal. DOB is not yet accepting ATR applications; the window opens once the pilot rules are final, and owners must apply by April 20, 2029.

To get accepted, the unit must already have the basic safety features listed in the rules DOB proposed in November 2025: working smoke alarms and carbon monoxide detectors, a central heating system, adequate egress, and proper separation between the apartment and any boiler equipment. These are the floor, not the ceiling. Once you are in the program, your tenant legally remains in place and you face no penalty for the unit being occupied while you work through the compliance milestones.

The 10-year compliance timeline. Local Law 126 sets the early milestones itself: within 3 months of the ATR, smoke and carbon monoxide alarms, water sensors and alarms, required signage, and notice to tenants about the city's emergency alert system; within 1 year, fire separation and a passing radon and vapor test; and within 2 years, the biggest one, an automatic sprinkler system. Any further requirements depend on DOB's rules, which are not final. The full 10 years ends with a certificate of occupancy that permanently adds the unit to the city's housing stock as a legal ancillary dwelling unit.

Tenant rights inside the pilot

If you are a tenant currently living in an eligible basement unit, here is what Local Law 126 gives you. Tenants who occupied the unit as of April 20, 2024, have a statutory right of first return after any renovation work requires a temporary vacate. The details are still pending: HPD has proposed a rule, not yet final, that would require the landlord to tell you when the work starts and when you can expect to return, and, at least 60 days before the work is expected to be done, to notify you of your right to return with a written lease stating the initial monthly rent. Document your occupancy date now. If your landlord applies for an ATR, verify that this right-of-return language appears in whatever agreement you are asked to sign.

The Plus One ADU program: up to $395,000 in NYC

New York State's Plus One ADU program, administered through HCR and local program partners, offers NYC homeowners up to $175,000 in state grants plus up to $220,000 in HPD loans to legalize or construct an accessory dwelling unit. The money covers design, permitting, architectural and survey fees, and construction costs. In NYC, you need to be an owner-occupant earning up to 165% of Area Median Income, with preference for households at or below 120%. Applications go through HPD and its program administrator, Restored Homes HDFC.

One note on numbers: the $395,000 figure cited in the city's March 2026 "ADU for You" launch is the maximum combined support, the state grant and the HPD loan together. If you see a $125,000 figure elsewhere, that is the state grant cap for Plus One programs outside New York City.

If you are already evaluating a basement project with A-du or just starting to map out whether your unit qualifies, A-du's services marketplace connects NYC homeowners with licensed architects and contractors who can review your community district, flood-zone status, and current safety conditions before you commit to an application.