A basement apartment is an apartment located below street level, underneath another structure - usually an apartment building, but possibly a house or a business. Rent in basement apartments is usually much lower than in above-ground apartments, due to a number of deficiencies common to basement apartments. The apartments are usually cramped, and tend to be noisy, both from uninsulated building noises and from traffic on the adjacent street. They are also particularly vulnerable to burglary, especially those with windows at sidewalk level. In some instances, residential use of below-ground space is illegal, but is done anyway in order for the building owner to generate extra income. Karel Teige says of the basement apartment under a house that "a basement apartment is a hostile environment and feels like an alien weight, dragging down the poor, serving only if fed by blood and sweat, a place the worker is not allowed to consider as his own home..."

A number of noted artistic achievements have occurred in basement apartments occupied by struggling authors, painters, and musicians.

Andy Warhol made one of his earliest films, Mrs. Warhol (black-and-white, 66 minutes), in the basement apartment of his house, where his mother (Julia Warhola) lived.

Ruth McKenney based a series of stories in The New Yorker, later republished in the book My Sister Eileen, on her experiences living with her sister in a moldy, one-room basement apartment above the Christopher Street subway station at 14 Gay Street in Greenwich Village for which she paid $45 a month. The apartment was burgled within the first week during the six months they lived there.

Basement apartments were the subject of Canadian singer-songwriter Sarah Harmer's hit single "Basement Apartment" in 2000.