Last year, my partner and I and a good friend pooled our savings to buy a two flat in the city we've all lived in for the last 10 years that we hope to live in for a very very long time. The house needed a lot of work, so while we were doing that, we lived in the basement, which has been retro-fitted into a unit. It is not a legal unit due to very low ceilings and only one entrance, and we know nothing about when it was converted and what is and is not up to code.
We specifically did not want to buy a three-flat because we did not want to be landlords. This was the house that worked for us, we intended to treat the basement as a basement with a guest room we would share access to.
When we moved upstairs into our unit, one of my friends asked to move into the basement due to a recent break up. I suggested a very reasonable rent price of $450 including all utilities and said he could crash there for 6 months while figuring out his next steps. He is financially struggling, so we ended up telling him not to worry about rent and to take the opportunity to address some debt and get things sorted.
A month or so ago, he told me that we are displacing him which is an act of violence and contrary to our values and due to racism (I am white, he is Black). We have talked about this over text and in person several times, with him begging to stay longer, saying we need to share what we have, and that it is immoral to let the basement ever be empty when it could house a person.
Some other context:
I work a full time job and also a second job to help pay for some of the expenses of being a recent home owner of a 120 year old house that still needs a ton of work. He works at a restaurant and they rarely give him more than 30 hours a week. He has not asked for more hours, a raise, or applied for any new jobs.
He is from a much poorer background than I, single mother, always low-income. I am from a middle class background. Enough money that there was food on the table, not enough to vacation.
Last month the basement flooded during a major storm. The unit now needs major work done that will rip it apart two separate times to avoid mold growing. He usually sleeps all day, making it inconvenient and difficult for us to get access to the unit to handle the repairs.
I am extremely conflicted about what to believe in this situation, both in regards to my friend staying and how to handle the morality of having a unit that could be lived in (though not legally) that we choose not to fill. I felt that we were making a very careful and value-aligned decision to co-buy and have a co-op living situation, but now it is a highly stressful scenario weighing on us all.
I've told him several times: We will not kick you out or evict you at the end date we agreed upon if you can't find anything, but we expect you to respect our request that this not be a long-term living situation. This is not good enough for him, he wants to be able to live here long term.
I would value advice or feedback on either regard.