N.Y.C. Admin. Code tit. 27, ch. 2 § 27-2082

A dwelling unit in the cellar or basement of a multiple dwelling may be occupied if all of the following requirements are met:


a. Every room has a minimum height of eight feet in every part in dwellings erected after July first, nineteen hundred fifty-seven, and of seven feet in dwellings erected prior thereto.


b. Every room has at least one-half of its height in every part above the highest level of an "adequate adjacent space." As used in this section an "adequate adjacent space" is an area outside the dwelling which:


(1) is thirty feet in its least dimension,


(2) is located on the same lot as the dwelling or in a street or public place,


(3) is open and unobstructed, except as provided in subdivision nine of section twenty-six of the multiple dwelling law, and


(4) abuts at the same level, or directly below, every part of the exterior walls of every dwelling unit located on the same floor.


c. The bottom of such "adequate adjacent space" is at a level no higher than six inches below the sill of any required window opening on such space.


d. Whenever the floor of any part of the dwelling unit is below the level of such "adequate adjacent space," either the ceiling, walls and partitions of the dwelling unit are fire retarded or the dwelling unit is equipped with a sprinkler system in a manner satisfactory to the department.


e. The entire cellar or basement in which the dwelling unit is located complies with all requirements of the multiple dwelling law with respect to fire protection and to means of egress, including cellar and basement stairs and cellar entrances.


f. A cellar occupied hereunder for dwelling purposes shall be counted as a story for the purpose of the requirements of the multiple dwelling law with respect to means of egress, but shall not be counted as a separate story for the purpose of determining when a dwelling must be of fireproof construction.