Impact Fee

A one-time charge levied by a local government on new development to fund public infrastructure improvements — such as roads, schools, parks, and utilities — needed to serve the additional demand created by the project.

What is an Impact Fee?

An impact fee is a one-time charge imposed on new development to fund the construction or expansion of public infrastructure needed to serve the additional demand generated by the project. The legal premise is that new development should pay its proportional share of the cost of new roads, schools, parks, water systems, sewer systems, and other public facilities that it necessitates.

How Impact Fees Are Calculated

Impact fees are typically established through nexus studies that quantify the relationship between new development and infrastructure demand. Fees are set per unit of development — for example, per dwelling unit, per square foot of commercial space, or per trip generated. Fee schedules vary enormously between jurisdictions, from a few hundred dollars in some areas to tens of thousands of dollars per unit in high-cost markets.

Impact Fees and Project Economics

For commercial developers, impact fees represent a significant cost that directly affects project feasibility. In some jurisdictions, combined impact fees can add $20,000-$100,000+ per residential unit or $10-$30+ per square foot of commercial space. These costs must be accurately estimated during the due diligence phase, as they are typically paid at permit issuance and cannot be negotiated.

Fee Waivers and Deferrals

Some jurisdictions offer impact fee waivers, reductions, or deferrals for projects that provide public benefits such as affordable housing, are located in designated redevelopment areas, or utilize existing infrastructure capacity. Understanding available fee incentives can meaningfully improve project economics.