Drywall alternative

Hi all, I've been looking through the threads but haven't found what I'm looking for. Any help is greatly appreciated.

I've been working away framing out the basement out a townhouse. The wall beside the stairs (a cement wall, but interior as shared with nextdoor) has a 1/2 inch gap between the stairs and the wall.

Obviously I don't think drywalling right to this is a good idea, but what are some other options for finishing it? Or is there a way to put drywall up?

I've considered moving the stairs, but that will really mess with the existing landing. I'd really like to really not frame out into the stairs as well, but if that's my only option it may come down to that.

Thoughts anyone?