New NAHB Resource Highlights How Impact Fees Exacerbate Housing Affordability
As local governments increasingly turn to development impact fees as a funding solution for growth-related infrastructure, it is critical for stakeholders in the building and development industry to push back against these fees being used as a blank check revenue source. Impact fees, while often positioned as a fair solution to fund infrastructure, disproportionately shift the burden of growth onto home builders, developers and, ultimately, new home buyers.
Development impact fees are one-time charges levied by local governments on new development projects.
The adoption of impact fees was driven by several factors including:
- Declining federal and state funding for local governments;
- Growth-related costs of infrastructure and public services;
- Resistance to use general fund revenues to fund growth-related infrastructure;
- Using impact fees as a dedicated funding source to service new growth;
- Utilization of impact fees as an alternative to raising property taxes on all residents to fund infrastructure to serve new growth.
This practice exacerbates housing attainability challenges and adds unnecessary financial strain at a time when affordable housing remains a top national priority. Impact fees should only be considered as a funding mechanism when all other options — including taxes, bonds and special districts — have been exhausted.
The development and home building industry generally support the use of impact fees to fund growth related infrastructure so long as they are fair, equitable and transparent in their calculation. Industry members must remain vigilant and advocate for transparent, equitable solutions that reflect the broader economic benefits of new development rather than solely viewing it as a cost burden.
To help members in their efforts, NAHB — in conjunction with Launch Development Financial Advisors — has provided an updated impact fee primer. It includes recent economic data on how impact fees affect the price of a new home and how many households may be priced out of the market as a result, as well as a geographical overview of which states allow impact fees.
Access the primer, impact fee handbook and other impact fee resources in the impact fee toolkit.