Understanding Impact Fees

Land Development
Published
Contact: Nicholas Julian
[email protected]
Director, Land Use
(202) 266-8309

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.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Economics | Housing Affordability

Feb 24, 2026

Falling Mortgage Rates Make Homeownership Possible for Millions of Households

The average interest rate on a 30-year fixed-rate mortgage fell to around 6% last week, the lowest rate borrowers have seen in close to three years. Borrowers will not only enjoy lower monthly payments at that rate, but it also makes homeownership possible for millions more.

Material Costs

Feb 23, 2026

Supreme Court Strikes Down Trump’s Tariffs – But Uncertainty Persists

The Supreme Court on Feb. 20 ruled that President Trump’s attempts to use emergency powers under the International Emergency Economic Powers Act (IEEPA) was not valid. But Trump still has wide latitude in setting tariff policy and announced a new global tariff of 15%. American consumers and businesses are unsure how any new tariffs will affect them.

View all

Latest Economic News

Economics

Feb 24, 2026

Young Adult Headship Rates in 2024: Cyclical Slip or New Equilibrium?

Reversing the post-pandemic rebound, the headship rates among young adults (the share of the population heading their own households) declined in 2024, according to NAHB’s analysis of the American Community Survey (ACS) data.

Economics

Feb 23, 2026

A 25-Basis-Point Decline in the Mortgage Rate Prices-In 1.42 Million Households

Housing affordability remains a critical challenge nationwide, and mortgage rates continue to play a central role in shaping homebuying power. Although rates have declined from the recent peak of about 7.6% in 2023 to around 6.01% as of February 19,2026, they remain elevated relative to typical levels in the 2010s.

Economics

Feb 20, 2026

New Home Sales Close 2025 with Modest Gains

New 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.