Impact fee
Definition
An impact fee is a one-time charge a city or county imposes on new development to help pay for the roads, schools, parks, or utilities that growth requires.1 Fees must be based on a documented cost formula tied to the size and type of the new development.
Why it matters
Impact fees shift infrastructure costs onto new construction rather than existing taxpayers, but high fees can also make new housing more expensive to build, a tension at the center of debates over housing affordability. Because the formulas are technical and set administratively, they often change with far less public attention than a tax vote would draw.
Seen in the wild
A UC Berkeley Terner Center study of California affordable housing projects built from 2020 to 2023 found nearly all 691 projects paid development impact fees, averaging almost $20,000 per unit and, on 134 projects, exceeding $30,000 per unit, contributing to roughly $300 million a year in fees paid by affordable developments statewide.2