New York City just made it legal for homeowners to build rental apartments in their basements, attics, garages, and backyards. It’s called the City of Yes — the biggest zoning change in 60 years.
Everyone’s talking about it. But here’s what nobody’s telling you: only about 12% of properties in the city actually qualify.
In this guide, I’ll break down exactly what an ADU is, whether your property qualifies, what it costs to build one, and how much rental income you could realistically generate.
📺 Watch the full video breakdown:
What Is an ADU?
ADU stands for Ancillary Dwelling Unit (also called an Accessory Dwelling Unit). In plain English, it’s a small, self-contained apartment added to an existing property.
Under the City of Yes zoning changes that passed in December 2024 and went into effect in 2025, homeowners with one-or-two-family homes can now add one ADU to their property.
That ADU can be:
- A finished basement or cellar
- A converted attic
- A converted garage
- A brand-new detached backyard structure (like a small cottage)
Key rules to know:
- The ADU cannot exceed 800 square feet
- A detached structure cannot cover more than 33% of your required rear yard
- The property owner must live in either the main home or the ADU — you can’t rent out both
Does Your Property Qualify?
This is the big question — and the answer is more restrictive than you might think.
The Regional Plan Association analyzed the data and found that only about 68,000 of the city’s 565,000 one-and-two-family properties are eligible for an ADU. That’s roughly 12%.
Why so few? Several reasons:
1. Flood Zones
If your property is in a coastal flood zone — and significant portions of Staten Island’s East Shore and South Shore are — basement and cellar ADUs are NOT allowed. Backyard ADUs would need to be elevated above the floodplain, which adds significant cost.
2. Zoning Restrictions
Backyard ADUs are banned in some single-family zones farther from transit. In Brooklyn, Councilmember Justin Brannan secured an exemption banning backyard ADUs in parts of Bay Ridge.
3. Historic Districts
If your property is in a landmarked or historic district, ADU construction faces additional restrictions.
4. Lot Size and Configuration
Your lot needs to be big enough to accommodate the ADU while maintaining required setbacks and yard coverage limits.
How to find out if your property qualifies: The NYC Department of Buildings has started accepting ADU applications. You can check the city’s zoning and land-use maps, work with an architect or expeditor who specializes in ADU permits, or book a free property assessment with me and I’ll help you figure it out.
What Does It Cost to Build an ADU?
Building an ADU is not cheap — this is New York City construction. Here’s what to expect:
Basement Conversion: $50,000 – $150,000
Finishing an existing space, adding egress windows, plumbing, electrical, and meeting building code requirements.
Attic Conversion: $60,000 – $120,000
Can be more complicated depending on ceiling height, structural support, and stairway access.
Detached Backyard Unit: $100,000 – $250,000+
A small cottage or studio — the most expensive option depending on size, foundation, and utilities.
Don’t forget the soft costs — architect fees, permits, and engineering reviews can add another $15,000 to $30,000.
Good news: The city has launched the Plus One ADU Program through HPD that provides financial assistance and technical support to eligible homeowners. This can help offset construction costs, particularly for homeowners in lower-income brackets.
ADU Rental Income Potential
Here’s where it gets exciting.
Staten Island:
- Legal 1-bedroom basement apartment: $1,500 – $2,000/month
- Studio: $1,200 – $1,500/month
Brooklyn (Bay Ridge, Sunset Park, Bensonhurst):
- Legal 1-bedroom basement: $1,800 – $2,500/month
The Math: Staten Island Basement Conversion
- Construction cost: $100,000
- Monthly rental income: $1,750
- Annual rental income: $21,000
- Net after 20% for expenses: ~$16,800/year
- Break-even point: ~6 years
After that? Pure income.
Bonus: That rental income also helps you qualify for a higher mortgage if you’re buying a property with ADU potential. Lenders count 75% of projected rental income when calculating your debt-to-income ratio. And a home with a legal ADU is worth significantly more than the same home without one.
Can You Legalize an Existing Basement Apartment?
This is the question I get the most. The answer is yes — there’s now a path.
Local Law 126, which passed alongside City of Yes, created a process for legalizing pre-existing basement and cellar apartments.
Here’s how it works: You have a 10-year window to bring your existing basement apartment into compliance with the new building code requirements in Local Law 127. That includes proper egress, ceiling height, ventilation, fire safety, and plumbing.
Before City of Yes, if you had an illegal basement apartment and the city found out, you faced fines and were required to remove the apartment. Now there’s a legal pathway to bring it into compliance.
Important: You still need to meet code. The apartment has to be safe — proper windows, proper ceiling height, proper electrical, fire separation between floors. If your existing basement doesn’t meet these requirements, you may need to invest in construction upgrades. But the path is there now, which it wasn’t before.
Your Next Steps
ADUs are going to be a major part of the New York City housing story over the next decade. For Staten Island homeowners especially, this is an opportunity to generate real income from property you already own.
But it’s not automatic. Not every property qualifies. The costs are real. And the permitting process is new and still being figured out.
Here’s what I recommend:
- Download the free ADU Eligibility Guide — it walks you through zoning requirements, the property eligibility checklist, estimated construction costs, and rental income projections.
- Book a free property assessment — I’ll pull your zoning information, check the flood maps, and give you an honest answer about whether your property qualifies.
I’m Joseph Ranola with the Bridge and Boro Team at Real Broker. If you have questions about ADUs, property eligibility, or real estate in Staten Island and Brooklyn, don’t hesitate to reach out.
Follow me on Instagram: @ranolarealestate
