The New York City real estate market has gotten so bad that people are paying millions to live in the basement

Sean Pavone/ShutterstockNew York City dwellers are paying millions to live in basements.

  • New York City real estate is so outrageous that homebuyers are paying millions for underground apartments, according to a New York Times article.
  • Below-grade spaces offer more space at a fraction of the cost of other units in their buildings.
  • A pilot program is in the works for the creation of legal basement and cellar apartments in Brooklyn – if successful, it would ideally bring more affordable housing.

New York City real estate may currently be a buyer’s market at all price points, but that doesn’t mean it’s becoming any less outrageous.

The real estate market in New York City has gotten so expensive that many buyers are forgoing apartments in the sky for basements underground, according to a recent New York Times article.

“As prices continue to decline in the luxury market, developers are keen on maximizing every square foot, including below-grade space, while buyers seek out bargains in a supply-heavy market,” writes reporter Stefanos Chen.

Underground apartments are becoming so popular that a pilot program is in the works for the creation of legal basement and cellar apartments in East New York, Brooklyn, reports Chen, adding that while some basement apartments are legal, cellar apartments aren’t.

Park Slope city councilman Brad Lander told Chen there’s probably more than 300,000 residents in illegal basement and cellar apartments in the city. If the program is successful, below-grade units would, ideally, help bring more affordable housing to the city.

For buyers, these below-grade spaces offer more space for roughly one-fourth of the cost per square foot than other units in the same building, reports Chen, citing data from StreetEasy. But they often still cost millions.

One couple who spoke to the Times spent $US1.2 million in 2015 on an 1,800-square-foot duplex studio below street level in Midtown East. It was the only similarly sized space within their budget below 135th street, and they still spent over a year renovating to bring more light in.

Another buyer said she bought a 2,100-square-foot, two-bedroom underground duplex on the Upper West Side for $US2.3 million – twice the size of her place in Williamsburg, Brooklyn. She told the Times the smaller apartment above her was listed for roughly $US1 million more.

Living underground has a few limitations

Below-grade spaces do have their limitations: bedrooms aren’t permitted in a completely below-grade space, and because of plumbing rules, only half-bathrooms (read: no showers) are allowed, according to the Times. Developers can use the basement as “rec rooms” for ground-floor buyers or place full apartments below street level, creating taller ceilings and full length windows to increase the appeal of the space.

“Because below-grade homes are typically cheaper than above-grade space, buyers can stretch their dollars, with some limitations, while developers make the most of their investment,” writes Chen.

Despite these limitations, space is hard to come by in the city – especially when it’s at a bargain.

Several developers told Chen these bargain units sell fast, often being the first sale in a building. Consider a 1,289-square-foot ground-floor studio at the Shephard in the West Village: with about half the space below street level (and therefore not legally a bedroom), it was one of the first units to sell. At $US1.785 million, it was much lower than the StreetEasy reported average sales price in the building of $US9.1 million, writes Chen.

Likewise, a 450-square-foot underground unit in the Chatsworth on the Upper West Side sold for roughly half a million with 70 prospective buyers. An agent involved with the deal told the Times the buyer, who plans to eventually list the unit as a rental, wouldn’t have been able to get into the building otherwise.

Read the entire New York Times article ยป

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