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
Apr 07, 2026
Trump Seeks Nearly $11 Billion Cut to HUD ProgramsPresident Trump has proposed a budget that would cut non-defense discretionary spending by $73 billion for fiscal year 2027, which runs from Oct. 1, 2026, through Sept. 30, 2027. The spending reductions include a $10.7 billion cut — about 13% — for the U.S. Department of Housing and Urban Development (HUD).
Apr 06, 2026
Emerging Green Building Professional Spotlights Innovative Takeaways from IBSThe NAHB IBS Sustainability and Green Building Scholarship aims to provide emerging green builders exposure to the world of high-performance homes and help them jump-start their professional journey by attending the International Builders’ Show (IBS). This year’s winner is Grace Weger, a green builder making a meaningful impact in the world of affordable housing.
Latest Economic News
Apr 07, 2026
Rising Rates Weigh on Mortgage ActivityMortgage application activity decreased month-over-month as the 30-year fixed mortgage rate rose. The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage application volume, declined 4.3% from February on a seasonally adjusted basis but remained 30.8% higher than a year earlier.
Apr 06, 2026
Which States and Construction Trades Depend the Most on Immigrant Workers?Immigrants’ share of the construction workforce reached a record high in 2024, with foreign-born workers accounting for more than a quarter of the industry’s labor force (26.3%). The share is even higher among construction trades, for which one in three craftsmen is foreign-born.
Apr 03, 2026
Job Growth Rebounds in MarchThe U.S. labor market showed signs of a modest rebound in March following a weak February, as payroll employment increased and the unemployment rate edged down to 4.3%. Job growth was led by healthcare, construction, and transportation and warehousing.