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The introduction discusses the benefits of creating a basement unit, at a building and city scale, with review of ADU terms and Chicago proposals. It explains the importance of safe and sound construction, based on typical basement hazards. The final section guides users on how to use the manual, to identify and navigate a basement project, with alternate use scenarios and an outline of a typical conversion project — in ten steps — including guidance on finding an architect and choosing a general contractor.
This introduction covers:
Basement rental units are one of many different types of ‘Additional Dwelling Units’ (ADUs). In housing policy, this acronym identifies granny or in-law flats, coach houses, and casitas. An ADU is any small unit —with its own bathroom and kitchen— that is built upon the same site as a primary residential building. This includes units in attics, rear additions, and backyard buildings. Other cities often use the term ‘Accessory’ for these small, supplemental apartments, in attached or detached positions. (See diagram right.)
As a homeowner, there are financial reasons to consider converting a basement unit:
In addition, there are a number of social benefits to creating smaller, basement units that pay collective dividends, to owners and tenants:
For all the benefits noted above, basement unit conversions require diligent construction given Chicago’s low elevation and the challenges of working with existing structures.
On December 16, 2020, the ‘Additional Dwelling Unit Ordinance’ was passed by city council; with pilot areas going to effect May 1, 2021. The pilot areas allow for greater density per lot with the construction of one or more additional rental units in Two-Flat and Multi-Unit residential zones (RS-2 +). Within the official language of Chicago’s ordinance, additional units are discussed as either ‘carriage houses’ (separate rear units) or ‘conversion units’ (in basement or attics). For the purposes of this manual ‘additional,’ or ‘conversion’ unit all designate a new rental unit built within your existing basement.
This manual specifically addresses basements because several Chicago residential types —Two-Flat, Cottages, even Bungalows— commonly have full height basements for conversion. In addition, illegal basement units serve some of the city’s most vulnerable populations (with rent well below market rates); this guide should assist in bring such units up to code, for the health and safety of tenants, while preserving access and affordability.
This manual helps you, a potential ADU creator, capitalize on the benefits of a basement unit and realistically address construction challenges. It walks through the core requirements for a legal basement unit and lays out the key building systems necessary for safe inhabitation. It provides the tools to weigh the social, economic, and personal value of an additional basement unit with the costs, construction, and liability required. The goal is to help you assess the viability of a basement unit and understand the building systems involved, so that you can engage with financing, design, and trade professionals in pursuing a project.
Your decision —to convert a basement unit— should be made based on your circumstances and a desire to create housing. At the moment, Chicago lacks at least 120,000 affordable rental units, with a sizable need for accessible housing for aging and differently-abled tenants. DePaul’s Housing Institute estimates that Chicago’s existing housing stock could easily add 175,000 affordable basement units. Just in Two to Four-Flats, DePaul estimates over 77,000 basements could be converted, distributing more affordable housing and increased density throughout the city.
How did we get here?
After facing housing shortages during World War I, Chicago saw a housing boom during the 1920s. In 1923, the city implemented zoning, largely regulating building shapes to guarantee air and light access. Most residential areas in Chicago were designated ‘apartment districts,’ which permitted the development of Chicago’s characteristic courtyard buildings and Two-Flats. Beyond the Loop, Old Town, and Near South Side, the majority of Chicago’s current housing was developed in the interwar era.
Near the peak of urban in-migration in 1957, Chicago revised its approach to zoning. It supplemented the 1923 ordinance with an emphasis on exclusionary uses (i.e. no commercial storefronts in residential zones), density ratios (allowable units/lot area), and changed most ‘apartment districts’ to be single family zones, designed to limit over-crowding. This shift suppressed the creation of smaller apartments and extended family flats. Following these rules, developers focused on making stand-alone bungalows or, for commerical investors, lakefront towers and up-scale apartments. Combined with racial covenants, redlining, and ‘blockbusting’ speculation, the municipal support of single family development reinforced segregation and fostered white flight, a declining city tax-base, and urban disinvestment.
In addition to zoning, the current housing shortage also has its roots in the recent, subprime mortgage crisis. Succinctly, subprime lending before 2008 focused on areas that saw minimal mid-century investment due to redlines and older multi-family housing. With a higher percentage of predatory loans, these neighborhoods were hit hardest by foreclosures after 2008. They experienced increased instability for renters and a greater number of distressed properties sold to private equity and remote investors. Nearly 27,000 rental units have disappeared from two to four-flats, due to decay, demolition, and conversion into single family homes (in gentrifying neighborhoods).
The zoning reforms of the ‘Additional Dwelling Unit Ordinance’ present the opportunity to increase rental housing stock with additional units and support local, owner-occupied investment in Chicago’s neighborhoods. As will be discussed in ‘Code Compliant Units,’ the pilot areas are designed to test different regulations aimed at limiting gentrification and fostering afforable rents. (See the City's ADU microsite for more details.)
Census research from Enterprise Community Partners and the DePaul Housing Institute for Housing Studies has found that a large portion of Chicago’s lower-income renters live in basement units. These units are more affordable, but often noncompliant with City codes, posing serious health and safety hazards for tenants. Saying that a unit is ‘illegal’ under zoning regulations does not automatically make it unsafe, but trying to keep the unit ‘hidden’ from the City’s building inspectors and tax assessors can lead to a number unintended, but consequential risks.
The tenant-owner relationships is based upon mutual extortion, making it an unstable living situation and risky source of rental income:
Keeping a unit ‘off the books’ can thus expose it to more serious regulatory scrutiny and financial penalties, making it a very risky investment strategy: illegal units are more likely to be reported for building code violations and receive visits from building inspectors, casting scrutiny on the entire structure. In turn, this deferred scrutiny increases the likelihood of:
In addition, if the owner is ‘hiding’ the unit, they may only have single family, not landlord, insurance and will be exposed to full liability and medical expenses for property accidents. Likewise, owners often fail to report illegal units’ rental income for taxes and thus owe back-taxes and fines to state and federal authorities
While you might shrug off these investment risks and the correction costs, it’s important to consider two things:
If you can cover the costs of a major civil lawsuit or extensive insurance, you have the means to finance code-compliant renovations and make your basement unit safe. If not, you should explore the home improvement loans from Neighborhood Housing Services.
For those resistant to paying for code-worthy work, the following pages examine the costs of non-compliance. While these scenarios emphasize material and safety hazards, the human costs should not be underestimated.
For all of the following scenarios, the assumption is that a basement has been occupied, but without renovation and adaptive updates. Keep in mind that any hazard you neglect in the basement will eventually affect the building as a whole; bad basement decisions trickle upward. Any time you bring a system up to code, you’re not just protecting your tenants—you’re protecting your home and any equity held within your property.
Consider this structural hazards scenario: Instead of replacing a bowing beam, you decide to add a number of walls to redistribute the weight from upper floors across your existing slab.
however, this will lead to linked structural problems:
Properly replacing a beam and adding columns only costs between $4,000-$7,000. But a ‘cheap’, quick fix multiplies your problems: slab patches ($2,000-$3,000), air sealing ($3,000-$7,000), localized wall/ceilings repairs ($2,000-$4,000), an engineering assessment of the structure ($300-$700) and your home insurance can cancel your policy for non-permitted work. The ‘cheap’ route cost between $7,300-$14,700, in advance of further structural repairs. It’s dangerous and doubles your bill. And this is the best-case ‘bad’ scenario; a floor collapse would compound your liabilities.
Consider this moisture-based hazards scenario: Instead of adding foundation drains and sealing your walls, which are mostly dry, you decide to simply finish the interior, with a mix of drywall and exposed brick. Let’s assume, if you didn’t seal the foundation walls, you probably didn’t check for foam ‘isolating’ gaskets beneath your basement and upper, wooden building structure.
however, this can lead to mold and moisture in several places:
Properly adding foundation drains and sealing walls is not inexpensive ($6,000-$13,000) with limited slab work. But a ‘cheap’ fix creates additional problems, concentrating moisture inside your structure: to resolve this you’ll need to demo interior walls ($3,000-$4,000), reassess structural rot ($300-$700), and add the required drainage before then replacing, conservatively, half of your basement walls ($15,000-$30,000). Even without rewiring, correcting mold, or getting repair permits, the ‘cheap’ route doubles or triples your costs. And you’re facing serious health and structural issues.
Consider this fire-based hazards scenario: Your basement is already wired, with fixtures from the 1970s. You pick smaller appliances and instruct tenants to use power strips. By leaving circuits as-is, you keep the current plaster ceiling intact.
however, these short cuts could create serious fire hazards:
Properly adding ceiling fire partitions and separate electrical for a unit is pretty inexpensive ($7,000-$12,000) considering the risk. But alas, the ‘cheap’ route amplifies risk to your tenants, your structure, and your life. Leaving aside civil and criminal negligence, the costs incurred for ignoring fire code could amount to all the equity in your home or your life.
In any of these scenarios, it’s assumed that you end up dealing with the material consequence of poor construction or maintenance decisions; the cost of short-cuts is equivalent to the cost of replacement or lost property and lives. In reality, you’ll also need to apply for permits for repairs and, if you are reported by a tenant, you can face a number of different fines for code violation.
Consider the mold and moisture scenario. You could be held responsible, and face any of the following violations, as well as associated fees for general violations:
and issue specific violations:
Each violation can run between $500-$1,000, with unpermitted work carrying subsequent fines that top out at $3,000-$5,000, and unsafe conditions violations (which trigger structural assessment) can cost between $1,000-$2,500. So you could find yourself facing around $4,000-$8,500 in violations on top of the costs of replacement materials and actually permitting new work.
When facing code violations, you may also decide not to rebuild a unit. This would limit your losses to fines, demolition costs ($3,000-$4,000), and, if the unit is legal, permits for unit deconversion.
If you’re an average homeowner, the thought of converting your basement can be overwhelming; the costs and challenges feel formidable. Where do you start? As noted in the diagrams at left, if you’re reading this, you likely fit into two general categories of owner-occupants:
You can take a linear approach, skimming the manual, or dive directly into issues of concern. In either scenario, the core contents of the manual —chapters 3, 4, 5— walk readers through:
Each manual chapter is broken down into ordered subsections, so you can review one code element, one financial aspect, or one construction choice at a time. Each subsection defines the topic at hand, identifies relevant technical experts for consultation, and includes illustrations to aid in visual assessment of your property and project. This approach allows you to proceed at a comfortable pace and treat each subsection as stable reference.
Each chapter also provides a mechanism to tally your observations in order to see interrelated tasks or financial implications. In ‘Code Compliant Units’, this includes assessment templates—for creating your own basement plan and notes—to aggregate your observations. In 'Mitigating Issues', decision diagrams help you trace likely construction trajectories. In 'Building Equity', linked spreadsheets calculate overall outcomes, pulling together your input with factors like area appreciation, interest, and affordable rental rates. These synthesizing tools typically rely on earlier decisions, so they work best if completed in a linear matter.
For those new to construction, code, and conversion units (scenario 2), two additional chapters are provided, preceding and following from core decisions:
These chapters bookend the core decisions, providing inspiration and an overview of building regulation more generally.
The proposed plans, in Common Conversions, underpin examples in all the other chapters so it is helpful to review those, even if you are focusing on the main compliance and construction sections.
If you’ve never done a construction project—major or minor—it’s also helpful to understand the broad contours and steps required. A basement conversion is not a small undertaking; it can involve structural and slab repairs, revised utility connections, new interior partitions, and finishing. In general, renovations require higher design fees and may be just as time consuming as new construction. This is because any new element must successfully dovetail with existing structures and the constraints of working on smaller, older sites.
The following section provides a visual summary of the 10 steps (1-5, then 6-10) involved in a medium to larger project (the last two relate to ongoing management). For each step it details:
For aggregated steps—the initial design process, construction documents through contract bidding, and construction itself—the graphic summarizes typical duration, costs, and scheduling variations.
This manual is meant to peak your interest in a basement conversion. The ‘How to Use’ section, above, should guide you through the different chapters, to determine whether the addition of a basement unit makes sense for your building and circumstances. The manual flags expert guidance and should assist in conversations with your architect, engineer, and contractor, throughout the larger design and construction process.
If you decide to pursue a project, you should confirm financial feasibility and legal risks with a) an accountant and b) a lawyer.
If you do not have an accountant or lawyer, you should research and seek out professionals in advance of contracting an architect and beginning the design process.
If you decide to pursue a basement project, you’ll want to hire an architect to direct the design process. While it may not be necessary for deconversion or a very small renovation, hiring a licensed architect can make the conversion process run a whole lot smoother. In Chicago, you will need an architect to submit for most building permits, under standard plan review. An architect will also provide a network of expertise, including trusted consultant engineers, contractors, and trade specialist.
You should begin by making and contacting a list of relevant firms to interview. Architectural practices specialize so you’ll want to find practitioners who focus on residential renovations, within Chicago, and, ideally have worked on basement unit additions. Resources for finding firms include:
In addition to general renovation and basement experience, you might seek out firms that have experience as: a) general contractors, b) do design/build work or c) are self-certified to expedite permitting, for integrated quality control on your project. Based on your goals, focus on what you want to achieve and seek out firms with that experience.
Before the interview, collect the notes you made when reading through this manual; jot down all your requirements and highlight any basement problems. Think in terms of what’s necessary and what’s desirable in a basement unit. Don’t worry about sketched solutions or plans—that’s what the architect is for. Gather the initial budget, from the ranges presented in ‘Building Equity,’ and your realistic revisions. This will help you discuss costs upfront and avoid disappointments, when facing revisions in construction documentation or bidding.
Most architects will do an initial consultation for a small fee. You should interview a few firms (3+) to get a feel for how each pursues the design process and construction administration. Follow-up on references; if possible, speak with their sub-consultant team members and visit finished residential projects. You’ll want to feel comfortable with the design team, as they’ll be in your life (and active, in your basement) for up to a year.
Once you’ve decided, the first thing to do is tell your chosen firm and notify any others consulted. You and your architect should agree on the following before work begins:
It’s important that this agreement is in writing and sets out the services to be provided, major deliverables and deadlines, billing structure, and outlines the obligations of each party. You have the right to negotiate the terms in the contract and ask for clarification before signing.
If possible, you should pay for early design work out of savings. At the end of Design Development, you will have solid enough designs for an appraiser’s estimate. This estimate secures financing for ongoing architectural, permitting, and construction.
After finalizing the contract, the design portion of the project will start with a ‘kick-off meeting.’ There the architect will refine the project goals by asking questions, listening, and trying to understand your agenda. A good architect will develop efficient solutions and propose ways to reduce costs while coming up with a design that satisfies most, if not all, of the project goals.
The schematic design process focuses on developing general layouts for you to choose between and collecting background information. If you don’t have a recent, existing plat of your property, your architect may measure and create preliminary, ‘as-built’ plans while commissioning a survey for an updated plat. As your design team sketches rough ideas, they’ll consult with experts to document additional site and building information, like getting soil cores, surveys of utility lines, and structural assessment of existing conditions. You can think of schematic design as the initial assessments in ‘Code Compliant Units’ and rough idea generation like ‘Common Conversions’.
After agreeing on a general layout, your architect will begin to resolve your basement design. This means your architect will show you fewer diagrams and more measured drawings, which communicate how different elements—walls, windows, doors—are placed to meet code requirements, site and building conditions, aesthetic ambitions, and more. By the end of design development, your architect should be able to prepare the 11x17 set of drawings (with existing and proposed features) required for an administrative adjustment (zoning) application. These plans should also have enough detail for an initial cost estimate.
Based on survey information, consultant input, and the materials from design development, your architect will develop detailed construction documents (CDs). Typically these are done in numbered order—50%, 75%, 90% CDs—which indicate the level of resolved detail and are collated with electric, plumbing, structural, and other expert consultant drawings. The completed, stamped construction drawing set is what your architect will submit to the Department of Buildings along with their building permit application. Your architect will also develop a text document, the specifications (specs), which articulates the building products to use and how they must be installed.
Often permit/technical review and bidding (next page) happen at the same time, so your architect will coordinate drawing revisions for the city and circulate amendments to contractors, for updating their estimates. Larger projects, with more complex construction, may do bidding later in this cycle; simpler conversions can seek formal bids earlier.
In general, CD sets are far more technical than this manual’s chapters, but details from ‘Mitigating Issues’ are analogous to residential CD details. The chapter ‘Navigating Permits’ lays out the documents and process of applying for zoning and building permits, as well as meeting required construction inspections. During this process, you can anticipate at least one or two rounds of drawing revisions. Ideally the fees for this step should come out of recently secured loans and grants.
Based on construction documents and specs, your architect will seek bids from contractors for construction. (If you are a Neighborhood Housing Services client, you may work with their construction specialists to coordinate and choose between bids.) At minimum, you’ll want three bids for your conversion, from firms that provide reliable, conscientious, and timely work. From a permitting and inspection standpoint, selecting a reasonable bid (and reliable firm) should limit installation and inspection issues down the road. Contractor bids will look very much like the line-item estimates in ‘Building Equity.’ The section below outlines researching contractors, for guidance on making bid decisions with your architect.
As a client, you can avoid contractor issues through a combination of due diligence in researching, selecting, and contracting with a contractor based on their bids.
You should take the following steps to avoid problems:
Check for complaints against contractors:
Just as when signing with an architect, your contract with a general contractor (and their team of licensed tradespeople) should be clear, in language you can understand, on exactly what work is to be done, when and how the payments will be made, and everything else you have agreed upon below. By law, you have 3 days to cancel the contract before it becomes binding.
Be sure to consider the following:
Once you sign with a general contractor and have approved permits, your contractor will prepare for construction. This includes finalizing the overall schedule, specified in the bid documents, and setting up the construction site according to fire safety regulations and safe disposal practices, If any environmental hazards have been identified for removal, your contractor should notify all tenants of abatement work, with state-licensed abatement professionals to cleaning, clearing, and preparing the site for further construction work.
The ‘Mitigating Issues’ chapter of the manual provides more details on lead and asbestos abatement permits and procedures within Chicago.
Depending on your architect’s contract and their scope for construction administration, they may coordinate site visits, monitoring, and confirmation of construction progress. When problems arise, based on newly discovered conditions, you will contract with your architect (for an additional fee) to edit and amend drawings, seeking permit updates as necessary. During construction, you should reach out to both your architect and general contractor to keep you apprised of the general progression of work and make sure all required inspections are happening as scheduled. If you have a larger building (5 flats with the new unit) inspections schedules should be coordinated, with your contractor, through temporary ‘Certificate of Occupancy’ applications with the Department of Buildings.
Based on your contracts, you should receive periodic invoices for finished construction tasks or revised drawings. These costs should be covered by your loans/grants and built into overhead. Make sure to document all payments and the work more generally. It’s important to keep good records in case there are conflicts about material installation, ‘remove/rebuild’ inspection orders, and ongoing work.
The manual chapter ‘Navigating Permits’ lays out the specific documents and the process of applying for coordinating inspections with the Department of Buildings. The list of required inspections provides a sense of construction order for basement conversion. ‘Mitigating Issues’ should help you to discuss any revisions to design, based on information that arises during the construction process.
Once your building passes all inspections and the work is complete, you and your architect will do a walk through, with a ‘punch list,’ to inspect the project and highlight outstanding details to finish before.... drumroll....you get the keys to your brand new basement unit.
Once construction is complete you should pay any outstanding invoices, finalize required ‘Occupancy Permits,’ and make sure your unit management plans are in order. This means refining rent estimates, photographing the unit for marketing (and as desired by the architect), and establishing any background banking accounts for tenant deposits, rental income, and out-going maintenance and management fees. Pulling building permits should trigger a property assessment, but it’s a good time to verify or apply for applicable tax and utility exemptions.
The manual’s ‘Building Equity’ chapter offers rough budgeting tools for apartment management tasks and links to a number of landlord resources.
With accounts in place and, hopefully, a fresh array of trusted contacts in the building industry, it makes sense to address long-term maintenance for your building. This includes getting contracts for annual, preventative work (from trusted tradespeople) as well as getting estimates on existing fixtures and systems that were not updated during conversion. You should also refine your budget for saving reserves and rental income for building maintenance.
As noted above, see ‘Building Equity’ for maintenance budgeting tools and resources.
The chart and ten steps described on the prior pages offer an overview of a mid-sized or large conversion project for a single family home into a Two-Flat. With costs between $160,000-180,000 total, you can expect about $20,000 in architectural fees (12%), and spending about $10,000 in advance of securing finalized estimates and loans.
A project of this size could take between seven month and one year, keeping in mind that exterior work like drains, utility service lines and new terraces/exits need to be scheduled around the Chicago winter. If you need to expedite any of the design or construction steps, that will raise overall project costs as it requires more labor. A smaller project could cost half this amount and take four to nine months (conservatively).
Proceed to the first chapter, ‘Common Conversions’ to explore common Chicago house types and how their characteristics affect potential basement units.
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