Understanding Impact Fees
Public service demands are constantly growing because of increasing population, inflation, rising real incomes, and myriad other reasons. And the local revenue base — including taxes, grants, and user fees and charges — does not always grow fast enough to meet the increased public service demands.
Many communities have turned to impact fees to construct public infrastructure systems on the assumption that new development must pay its way.
Impact fees are imposed by a local government on a new or proposed development project to pay for all or a portion of the costs of providing public services to the new development. This fee is levied on an upfront or front-end basis — usually at the time of building permit issuance or subdivision approval, or certificate of occupancy — and is prescribed by ordinance (although the dollar amount may or may not be specified).
However, the use of impact fees shifts much of the financial burden away from all public infrastructure users (i.e., the general public) to a narrow segment of the public: home builders and new home buyers.
NAHB has created a toolkit to explore impact fees and their potential effects on the local community, and to provide strategies for achieving balanced infrastructure financing solutions, including talking points for discussing impact fees within your local officials.
Learn more about this topic and other land development-related issues in NAHB’s Land Use 101.
Latest from NAHBNow
Sep 24, 2025
New Home Sales Post Unexpected Large Gain in AugustSales of newly built single-family homes jumped 20.5% higher in August, to a seasonally adjusted annual rate of 800,000 from an upwardly revised reading in July, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales is up 15.4% from a year earlier. The three-month moving average of new home sales was 713,000, an increase from the 656,000 in July. New home sales remain down 1.4% on a year-to-date basis.
Sep 23, 2025
NAHB Members: Join the Housing Industry’s Attorney NetworkDoing business with fellow members is a core value of the NAHB Federation. To strengthen that commitment, NAHB is building a network of attorney members to assist peers with legal issues.
Latest Economic News
Sep 24, 2025
Single-Family Construction Loan Volume Falls BackThe NAHB Land Acquisition, Development and Construction (AD&C) loan survey in the second quarter reported tightening credit conditions for builders. Consequently, FDIC data reporting the outstanding volume of 1-4 family construction loans fell in the second quarter.
Sep 23, 2025
Beyond the Official Unemployment Rate: A Deep Dive into U.S. UnemploymentIn August, the official, or standardly referenced, unemployment rate rose slightly to 4.3%, up from 4.2% in July. This marks the highest level in nearly four years, though it remains historically low.
Sep 22, 2025
Single-Family Homes Are Built Faster in 2024Building a new single-family home took less time in 2024 compared to the previous two years. On average, it now takes 9.1 months from start to finish.