Living in the Shadows

The city wants to help tenants in illegal apartments. But will the plan hurt them too?

By Pooja Chaudhuri and Qianhui Eva Wen

Apartment near Queens Midtown Expressway and 84th Street, where an elderly woman died in a flooded illegal basement apartment in Hurricane Ida in 2021. (Photos by Qianhui Eva Wen)

On September 1, 2021, Hurricane Ida poured record-breaking rain across New York City, causing devastating flooding and killing 13 people. Of those, 11 lived in unregulated basement apartments known as “shadow” rentals. 

While advocacy groups and lawmakers have pushed to regulate these dwellings for more than a decade, the flooding brought an urgency to the effort. 

Last month, City Comptroller Brad Lander proposed a pathway to bring basement apartments up to code.

But if a pilot program the City launched three years ago is any indication, the cost of improving those units is high and risks making them unaffordable for the very people who have little choice but to live there. 

Renting in the shadows 

In Sunset Park, Brooklyn, many basement tenants are elderly, people with disabilities, and those  living with visible mental health issues, according to Nicole Huang, founder of the Sunset Park Chinese community organization Parent-Child Relationship Association.

Oftentimes, basement tenants are excluded from other rentals because of limited credit, according to Aura Mejia, a tenant advocate at Neighbors Helping Neighbors, a housing counseling and advocacy group in Brooklyn.

“They are mostly low-income, on Social Security or food stamps. People who wouldn’t find other types of housing in this community,” Huang said in Mandarin. “Anything that may involve government visits, the landlords don’t want to rent to you. It’s too much trouble.”

Discriminatory renting practice is against the law, but Huang still sees it often in the unregulated rental market, which includes illegal basement apartments and other rentals without leases.

Units are found through stickers on street poles or through a distant connection. Transactions are made with cash. And landlords decide which tenants they want. 

Leticia Pazmino of Make the Road New York, a Queens advocacy group, said that many people who come to her office share similar issues. “Landlords evict tenants, accusing them of not paying rent,” she said, adding that the tenants “cannot do anything since the rent is paid in cash and the landlords don’t provide receipts.”

An Unsafe Haven

The tenants Mejia and Huang work with in Sunset Park are aware of safety risks that come with the dark, damp illegal rentals. The conditions can lead to chronic health issues for adults and children living in those units. Basement apartments flood, and according to the New York City Department of Housing Preservation & Development (HPD) also come with the risk of “carbon monoxide poisoning, inadequate light and ventilation, and inadequate egress in the event of a fire.”

“There are a lot of immigrant communities renting in those unregulated spaces, and that’s the scary part,” Meija said. “When there are language barriers, we don’t know what they are going through.”

Mejia and Huang have both seen the conditions in such apartments: 15 to 30 people crammed into a single 700 square-feet unit. Sometimes, they say, three generations from one family live together, and sometimes it’s just strangers. 

Buildings in Elmhurst, Queens, a neighborhood where multiple basement apartments were flooded during Hurricane Ida.

“You have to live with family members, relatives, friends, or roommates in order to pay these high rents,” Mejia said. 

Of about 250 tenants who come to Mejia’s office every year, she said, around 50 are tenants renting without a lease. Some of these tenants are coming to her to ask about their rights. 

One of them is Estelita Molina, 65, a single mother living with two daughters. She has lived in her unregulated apartment for 24 years, has paid her rent in cash, and, until recently, could have been evicted without any legal recourse. She finally got a lease in June after applying for New York State’s Emergency Rental Assistance, which required the document. 

Without a signed lease, no party would be “bound by its items,” according to the New York City tenant rights guide, drafted by former Attorney General Eric T. Schneiderman. A “month-to-month” tenant without a written lease can be asked to leave with 30 days’ notice. 

“Landlords do not need to explain why the tenancy is being terminated,” according to the tenant rights guide. “A landlord may raise the rent of a month-to-month tenant with the consent of the tenant. If the tenant does not consent, however, the landlord can terminate the tenancy by giving appropriate notice.”

But few basement apartments are deemed “lawful,” according to HPD. And cellars in one and two family homes can never be “lawfully rented,” with a lease. 

The City proposes a “Basement Law”

In 2008, housing advocacy groups Chhaya CDC and the Pratt Center for Community Development estimated that New York City gained 114,000 unaccounted for apartments between 1990 and 2000. This didn’t just include basement units but also illegal subdivisions and other unlawful conversions. But it is difficult to know the true number because these units are largely unregulated. In a 2021 updated report, Chhaya and Pratt estimated that 30,395 illegal basement or cellar apartments are located within just eight neighborhoods primarily in rent-burdened communities of color. 

The Comptroller’s latest report finds 424,800 basements and cellars in one, two, and three-family homes across five boroughs. And about 10%, 43,000, are facing some type of flooding risk. This number is estimated to grow to 136,200 by the 2050s. The City’s analysis is based on the methodology developed by Pratt for its Basement Data Dashboard. 

The latest report by Lander’s office proposes a basement law that would cover any already occupied basement and cellar units. The law mandates safety measures to protect tenants from such risks as fire, backwater clogging and carbon monoxide poisoning. It gives enforcement power to the City through fines for non-compliance. 

It further proposes technical and financial assistance to owners to convert their basements into legal living spaces. While on one hand it gives owners the right to legally pursue an eviction for non-payment of rent, it also gives tenants the “right to a renewal lease with annual rent increases no greater than 3% or 1.5 times the consumer price index.” 

“The City and State must also appropriately fund a voucher program for tenants who must be rehoused in order to keep them safe. These funds must be provided in addition to a significant capital investment from the City and State, which is needed in order to implement full legalization programs,” the Comptroller’s proposal states. 

Good intentions, high cost

“I think that the Comptroller’s plan is a helpful bridge to an overall conversion program in the long-term,” said Jose Miranda, program director at Chhaya. “It is really important that we have a much larger comprehensive program to not just determine if basement apartments are safe or not, but to assist homeowners to convert their basements into areas that would be safe.”

That was the plan in 2016 proposed in Brooklyn’s Community Board 5. The Basement Apartment Conversion Pilot Program (BACPP) which went into effect in 2019 allowed homeowners to sign up for financial assistance from the City to bring their units up to code. HPD provided amortizing or forgivable loans with an interest rate ranging from zero to 5% to homeowners depending on their income levels. 

But even with that assistance, a close look at the program’s term sheet shows that the financial burden for making units legal still fell heavily on homeowners. 

As Lander’s recent proposal acknowledges, “converting a basement into a legal ADU is an onerous, expensive, and complicated process.” 

His office reported that “according to estimates published by the City, approximately 100 homeowners out of an eligible 8,000 reached the home assessment step laid out in the BACPP process.” Only eight homeowners remain in the program due to severe budget cuts, Lander’s office wrote in an email response to RentWire. Funding to the program was cut during the pandemic. 

Replicating the program citywide would be an even more arduous and costly process. 

“We estimate that to make these small safety measures in 50,000 basement apartments over the course of 5 years would cost approximately $40 million per year,” according to Lander’s office, which did not provide a breakdown of the burden on the City compared to the burden on homeowners.

The BACPP’s maximum loan amount is $120,000 per home. But The New York Times reported last year that each conversion could cost at least $250,000 to $310,000 to comply with existing regulations, based on the findings from BACPP.

The human cost of legislation 

Even before the devastating flooding from Hurricane Ida, fire safety was one of the primary concerns for basement units. The proposed law mandates owners install smoke and carbon monoxide detectors. 

“Heaters make basements unsafe,” said Pazmino of Make the Road. “The heat from the kitchen also makes them prone to fires. They should have ventilation and two exits for emergencies.”

In his report, Lander lays out the many similarities between the proposed basement regulations and the Loft Law passed in 1982 – a response to “an informal system that left loft tenants without physical safety or legal protections.” 

But Hilary Sample, Professor of Housing Design at Columbia, said that comparing the Loft Law with basement regulation would not be a fair comparison. She said that the Loft units, “while having their own health concerns from the legacy of manufacturing, at least have light, air and greater ceiling heights with less physical risk of being trapped in their home like a basement has. It isn't apples to apples.”

The Loft Law of 1982, in addition to mandating safety measures, regulated rent. Lander’s proposal for legalized basement apartments is similar: the annual rent increase would be “no greater than 3% or 1.5 times the consumer price index,” whichever is higher. 

And tenants, after being offered year-long leases, would be protected from eviction. 

The City’s proposal, however, comes with unintended consequences. Regulation would improve living conditions but in turn, open up basement apartments as an option for many others who are currently deterred by safety concerns. This can end up displacing the very people it set out to protect. 

Prof. Brenden O'Flaherty, author and Urban Economics Professor at Columbia University, is supportive of the legislation: safety needs to be prioritized. But, he added, "Of course, all legislation can have unintended consequences.”

When the Loft Law was passed, landlords who brought the lofts up to regulations were asked to offer existing tenants leases they had agreed upon. The rent would be regulated, and tenants would be protected from evictions. But the industrial structures of lofts soon became a living aesthetic, and many people with more means than the original loft tenants came in. Now lofts are mostly renting for between $3000 and $6000 from Manhattan’s midtown to downtown, as listed on Apartments.com.

There are similar concerns about rent hikes for basement apartments. Mejia said that if the basement apartments “are safe and they have better conditions, and if they don’t fix the rent hike or eviction problems, it’s gonna be a crisis.” 

A basement apartment on Amsterdam Avenue in Manhattan. 

Robert Silverman, Professor of Urban and Regional Planning at University of Buffalo, said, “If regulations are put in place with maintaining affordability in mind, on balance tenants would have more protections and rights in regulated basement units, than if they continued to rent those units with fewer protections.”

The proposed law would require the “City and State” to provide housing for tenants living in units they must vacate because they are not up to code. Lander’s office estimates that if 5% of basement dwellers require housing assistance, the annual cost would be $70 million.

Increases in rent “will happen,” with high cost of conversion, Sample said. “Housing regulation in the city is uneven,” she said. “It unevenly houses people, and urgently needs reform.”

“We need to make sure the tenants aren’t getting evicted just because the landlord wants the property back or wants to rent it for more money,” Mejia said. “Because this is what is causing a really big crisis in the city. Tenants are being pushed out of their apartments. And then on top of that, we know that there’s no space in shelters.”