House Hacking & Living in AUDs

[Carl W.]

I'm reading many stories of individuals having success with their house hack by living in an AUD and renting out the rest of the property. My question is how are folks doing it. Many cities/municipalities have issues with these spaces being turned into completely separate living areas. I know major cities like NYC prohibit them but most do it anyway and risk the fines. I really want to finish off an AUD and rent out the entire home but I'm skeptical and don't want to get into issues with my local authorities. Do these individuals who have success doing this get permission beforehand or something? Also, doesn't adding the additional space mean you're increasing the property's overall number of units? 
I feel like I'm missing a piece of the puzzle.