Understanding Impact Fees

Land Development
Published
Contact: Nicholas Julian
[email protected]
Director, Land Use
(202) 266-8309

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.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Economics | Home Builders Institute

Jun 10, 2025

New Study Reveals Significant Economic Impact of Housing Industry Labor Shortage

A landmark study released today from the Home Builders Institute (HBI), in collaboration with NAHB, examines the economic impact of the skilled labor shortage for the single-family home building sector. The findings indicate that the skilled labor shortage’s impact on the residential construction industry is a multibillion-dollar annual challenge that is responsible for the lost production of thousands of newly built homes.

Safety

Jun 09, 2025

Trench Safety: Know the Different Excavation Requirements for your Project

Trench Safety Stand Down week kicks off on June 16, and NAHB is proud to team up with the National Utility Contractors Association (NUCA) and OSHA to raise awareness and prevent injuries and fatalities related to trenching and excavation hazards.

View all

Latest Economic News

Economics

Jun 09, 2025

AI’s Role in Reshaping Employment: From Theory to Home Building Sector Impacts

The rapid rise of artificial intelligence (AI), particularly machine learning and generative AI (GenAI), is reshaping industries, creating new economic opportunities, and raising critical questions about its long-term impact on jobs and economic growth.

Economics

Jun 06, 2025

U.S. Economy Added 139,000 Jobs in May

Despite ongoing economic and policy uncertainty, the labor market remains resilient, though early signs of softening are beginning to emerge. Job growth moderated in May, and employment figures for March and April were notably revised downward. The unemployment rate remained at 4.2%.

Economics

Jun 05, 2025

States with Highest and Fastest Rising Construction Wages, 2025

Wage growth in construction continued to decelerate in April on a national basis, but the differences across regional markets remain stark.