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 20, 2026
How Land Developers are Leveraging AI to Move FasterAI is helping today's leading land development teams operate differently. By connecting data across ownership, zoning, infrastructure, and development activity, AI can surface early signals of opportunity and support faster, more informed go/no-go decisions
Feb 20, 2026
Statement from NAHB Chairman Bill Owens on Supreme Court’s IEEPA RulingBill Owens, chairman of the National Association of Home Builders (NAHB) and a home builder and remodeler from Worthington, Ohio, issued a statement after the Supreme Court issued its verdict curtailing the power of President Trump to impose tariffs under the International Emergency Economic Powers Act (IEEPA).
Latest Economic News
Feb 20, 2026
New Home Sales Close 2025 with Modest GainsNew home sales ended 2025 on a mixed but resilient note, signaling steady underlying demand despite ongoing affordability and supply constraints. The latest data released today (and delayed because of the government shutdown in fall of 2025) indicate that while month-to-month activity shows a small decline, sales remain stronger than a year ago, signaling that buyer interest in newly built homes has improved.
Feb 20, 2026
U.S. Economy Ends 2025 on a Slower NoteReal GDP growth slowed sharply in the fourth quarter of 2025 as the historic government shutdown weighed on economic activity. While consumer spending continued to drive growth, federal government spending subtracted over a full percentage point from overall growth.
Feb 19, 2026
Delinquency Rates Normalize While Credit Card and Student Loan Stress WorsensDelinquent consumer loans have steadily increased as pandemic distortions fade, returning broadly to pre-pandemic levels. According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, 4.8% of outstanding household debt was delinquent at the end of 2025, 0.3 percentage points higher than the third quarter of 2025 and 1.2% higher from year-end 2024.