@OP: Since the landlord is also the tenant in the basement, why not consider negotiating with him to move into the basement if there's no solution for your "noise" upstairs? That way it solves the "I can hear you from downstairs/walk on eggshells crap". It beats being berated for all sorts of weird noises that he unreasonably cannot handle and it beats sticking it out for the remainder of the term.
If he refuses, then say he has no choice but to deal with the noise or allow you to break the lease. Walk louder until he relents.
Also, HE should be paying for anything that deals with noise. You should not be buying your own rugs to deal with the sound. It's his unit, it's his issue. He sounds like a dink, but if you're offering solutions, maybe he will work with you rather than fight you.
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