Renting out a basement can be an excellent way to collect a little extra income from what might have otherwise been unused space. However, not all basements can be rented out legally because of restrictions set by the Department of Buildings and Housing Preservation and Development. This post assumes that your basement meets basic requirements for habitation (click here to learn what those requirements are).
Note that basements are not the same as cellars. Cellars can never be rented out, no matter what the size of the dwelling. However, they can be legally occupied by family members, so long as they’re not used for sleeping, eating, or as the primary cooking space. (You can build a secondary kitchen in the basement with approval from the Department of Buildings, but with the understanding that this kitchen would only accommodate “accessory cooking.”)
Basements in One-family houses
Assuming the basement meets criteria for legal habitation, one-family houses can rent out their basement to other family members–for instance, an adult child or a grandparent. However, one-family houses can’t rent out to boarders.
Basements in Two-family houses
The basement of a two-family home can’t be rented, period. This is because renting out the basement would mean three families occupy the entire house, and there’s no such thing as a three-family dwelling–only a “multiple dwelling.” Classification as a multiple dwelling requires an entirely different certificate of occupancy (CoO).
Accordingly, then, if you have a two-family house and want to rent out your basement, you’ll have to apply for a new CoO. The Multiple Dwelling CoO will only be granted if your building meets all of the provisions of the Multiple Dwelling Law.