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
May 20, 2025
Why You Should Apply to Be the Next National Associate ChairApplications to serve as the next National Associate Chair are now open through Sunday, July 13.
May 19, 2025
NAHB Weighs In on Whether an Association Can Sue on Behalf of Its MembersThe Georgia Supreme Court recently heard a case whether a home builders association has “standing” - meaning the right to challenge the conduct of another party in court.
Latest Economic News
May 20, 2025
Single-Family Home Size Trending HigherAn expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower.
May 20, 2025
Slight Gains for Townhouse ConstructionTownhouse construction expanded more than 2 percent on a year-over-year basis per data from the first quarter of 2025.
May 19, 2025
Flat Growth for Single-Family Built-for-RentSingle-family built-for-rent construction posted flat growth on a year-over-year basis, as a higher cost of financing crowded out development activity.