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 10, 2026
Home Remodeling Profit Margin Jumps on Demand and Business PracticesProfitability for residential remodelers reached its highest level in nearly 30 years in 2024, according to NAHB’s most recent Remodelers’ Cost of Doing Business Study.
Latest Economic News
Apr 09, 2026
Remodeling Market Sentiment Edges Down but Remains Positive in First QuarterIn the first quarter of 2026, the NAHB/Westlake Royal Remodeling Market Index (RMI) posted a reading of 62, down two points compared to the previous quarter. Despite this decline, the overall reading has been solidly in positive territory since Q1 2020.
Apr 08, 2026
Remodelers Saw Profit Margin Gains in 2024Profitability for residential remodelers reached its highest level in more than two decades in 2024. Industry-wide profit benchmarks are important because they allow companies to evaluate their financial performance in context with the industry.
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.