May 22, 2026
New York City has an estimated 100,000+ illegal basement apartments. For decades, homeowners had no practical way to make them legal without a complete gut renovation most couldn’t afford. 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, creating a real path to legalization - with grant money available to help cover the costs.
In this video, I walk through everything NYC homeowners need to know: the two new laws, eligibility requirements, the application process, the 10-year compliance timeline, and the Plus One ADU grant that offers up to $125,000 to qualifying homeowners.
https://www.youtube.com/watch?v=XgCdSWnptqc
The City of Yes for Housing Opportunity initiative introduced two companion laws that work together to create a framework for legalizing basement and cellar apartments in one- and two-family homes across New York City.
Local Law 127 establishes the permanent building code requirements for what a legal basement or cellar apartment needs: ceiling height, natural light, ventilation, fire safety systems, and egress. Any new basement apartment must meet these standards going forward.
Local Law 126 is the pilot program - and the game-changer for homeowners who already have an occupied basement unit. It lets you apply to keep your tenant in place while you gradually bring the unit up to code over a 10-year period. You don’t have to shut everything down and do a full renovation all at once.
Three requirements must be met to qualify for the Local Law 126 pilot program:
1. The unit must have existed before April 20, 2024. This isn’t for brand-new conversions - it’s specifically for units that were already being used as apartments before that date.
2. Your property must be in one of the 15 eligible community districts:
3. The property cannot be in a flood zone. If your home is in a FEMA-designated flood area, you’re not eligible.
If you meet the eligibility requirements, the process starts with applying for an Authorization for Temporary Residence (ATR) through the Department of Buildings’ DOB NOW Build portal. The application window opened on September 30, 2025, and runs through April 20, 2029.
To get accepted, your unit must already have these minimum safety features in place: working smoke alarms, carbon monoxide detectors, a central heating system, adequate egress for emergencies, and proper separation between the apartment and any boiler equipment.
Once accepted into the program, you have 10 years to bring the unit into full compliance with Local Law 127. But there are milestones along the way - the biggest being the automatic sprinkler system, which must be installed within two years of getting your ATR. Additional milestones cover electrical upgrades, plumbing, and structural modifications.
While you’re working toward compliance, your tenant can stay in the unit legally and you won’t face penalties for the unit being occupied.
New York State’s Plus One ADU program offers grants of up to $125,000 to eligible homeowners who want to create or legalize an accessory dwelling unit, including basement apartments. The grant covers design, permitting, architectural fees, surveys, and construction costs. To qualify, you generally need to be a low- to moderate-income homeowner occupant of a one-family home. Applications go through local program administrators in your area.
Even if your property isn’t in one of the 15 pilot districts, Local Law 127 applies citywide. Any homeowner with a one- or two-family home can build a new legal basement apartment, attic apartment, or backyard cottage (ADU) as long as it meets the building code requirements from the start through the normal DOB permitting process.
I put together a comprehensive guide that walks through the entire legalization process, including the eligible districts, timeline and milestones, how to apply for the ATR, and how to look into the Plus One ADU grant. Download the free guide here.
Whether you’re wondering if your property qualifies for the pilot program or you’re thinking about buying a home with a basement unit, I’m happy to help you evaluate your options. Book a free consultation and we’ll go through your specific situation.
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