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
Feb 16, 2026
Florida HBA Helps ‘Fill the Gap’ for Local Trades EducationThe Treasure Coast Builders Association has helped prepare Florida’s future workforce through local Career and Technical Education programming.
Feb 16, 2026
NAHB Mourns the Passing of Past Chairman Dean MonDean Mon, 2020 NAHB chairman, passed away on Sunday, Feb. 15. Actively involved in the New Jersey building industry for more than 30 years, Mon was president of the D.R. Mon Group, Inc.
Latest Economic News
Feb 16, 2026
Cost of Credit for Builders & Developers at Its Lowest Since 2022The cost of credit for residential construction and development declined in the fourth quarter of 2025, according to NAHB’s quarterly survey on Land Acquisition, Development & Construction (AD&C) Financing.
Feb 13, 2026
Inflation Eased in JanuaryInflation eased to an eight-month low in January, confirming a continued downward trend. Though most Consumer Price Index (CPI) components have resolved shutdown-related distortions from last fall, the shelter index will remain affected through April due to the imputation method used for housing costs. The shelter index is likely to show larger increases in the coming months.
Feb 12, 2026
Existing Home Sales Retreat Amid Low InventoryExisting home sales fell in January to a more than two-year low after December’s strong rebound, as tight inventory continued to push home prices higher and winter storms weighed on activity. Despite mortgage rates trending lower and wage growth outpacing price gains, limited resale supply kept many buyers on the sidelines.