Revise Impact Fee Structures
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
What are Impact Fees?
Impact fees are charges assessed by local government to cover the infrastructure costs associated with new development. These one-time expenses are typically levied upon issuance of building permits to help ensure that public facilities and services -- including water and sewer systems, parks, and even schools -- have adequate capacity and infrastructure to meet the demands of a growing population. While impact fees are initially charged to the developers of new homes, the cost of the fees may be passed on to the occupants in the form of higher home prices or rents.
Where are these policies most applicable?
Revised impact fee structures are most likely to influence housing prices in communities experiencing rapid and significant growth. Semi-rural or exurban communities on the borders of expanding cities also may wish to consider implementation of revised impact fee structures. Times of slower development activity may represent a great opportunity to assess whether a community's impact fees are inequitable and in need of revision. Adopting an equitable impact fee schedule will help ensure that when new development does occur it proceeds in an orderly and well-planned fashion, without compromising either overall public revenue or housing affordability.
In the wake of the mortgage foreclosure crisis, some cities and counties with existing programs have temporarily suspended collections or reduced impact fee assessments. Others have delayed scheduled increases or adoption of new fees in the hopes of stimulating stalled development. Notably, in August 2009 the state of Arizona declared a moratorium on the creation of new impact fees or increases on existing fees effective through June 2011. The effects of such measures are difficult to predict, and some critics of the moratoria suggest that the tight credit market and large supply of foreclosed homes present greater obstacles to new residential development than impact fees. With tax receipts down in many communities, reduced collection of impact fees may only exacerbate existing revenue shortages. Supporters counter that reduced impact fees will stimulate new development and, in turn, create new jobs. View the "Latest News" section of ImpactFees.com to keep up to date on these trends.
The Center for Housing Policy gratefully acknowledges the input and feedback provided for this policy section by the follwing reviewers: Thais Austin, Debra Bassert and Paul Emrath, National Association of Home Builders; Becky Koch, HSBC Bank USA. Please note, however, that the views and opinions expressed on HousingPolicy.org are those of the Center for Housing Policy alone.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
What are Impact Fees?
Impact fees are charges assessed by local government to cover the infrastructure costs associated with new development. These one-time expenses are typically levied upon issuance of building permits to help ensure that public facilities and services -- including water and sewer systems, parks, and even schools -- have adequate capacity and infrastructure to meet the demands of a growing population. While impact fees are initially charged to the developers of new homes, the cost of the fees may be passed on to the occupants in the form of higher home prices or rents.
What problems do revised impact fee structures solve? Impact fees are often assessed on a flat, per-unit basis; for example, the same impact fee may be charged for a small townhome and a spacious single-family residence even though their "impact" differs. While simple to administer, this approach increases the cost of producing a modestly-priced home by a much greater proportion than that of a higher-cost home, even though the family purchasing the higher-cost home is likely to be in a better position to absorb the price increase. In addition, smaller homes built at higher densities or closer to existing infrastructure generally place a lesser demand on roadways and other services funded through impact fees; a disparity that is not reflected by a flat-fee system. Revised impact fee structures seek to make fee assessments more equitable while also balancing two compelling community concerns: the need for revenue to cover increased infrastructure expenses associated with new development and the need for homes affordable to working families. One approach is to move from a flat, per-unit impact fee to one that is proportionate to the size of a home or based on other housing characteristics that relate to estimated service usage. Proportionate fee schedules help to preserve housing affordability by reducing the fees associated with smaller, starter homes and infill development. Other approaches include allowing fee waivers and reductions for homes affordable to low or moderate income families, allowing impact fees to be paid on a deferred basis and developing impact fee schedules that are based on the level of existing infrastructure in a community, reducing charges in areas that already have significant infrastructure in place. | Solutions in Action |
| Based on a careful assessment of the County's need for affordable homes, as well as the expected infrastructure costs associated with new development, Alachua County, Florida adopted a residential impact fee schedule that sets fee amounts for parks, fire service, and transportation on the basis of a unit's square footage. The result is that smaller homes tend to be charged lower impact fees, helping to keep them more affordable. Unlike parks and fire service fees, transportation impact fee rates also vary, by development type. As of January 2010, developers of homes built in accordance with Traditional Neighborhood Development standards (TNDs) pay an impact fee rate that is $527/1,000 sq. ft. lower than the rate assessed on non-TND urban residential development. TNDs feature a mix of uses (i.e., retail and residential), and provide paths for bicycles and pedestrians, potentially lessening the impact on roadways. The county also has allocated funds for forgivable second mortgages to cover the costs of impact fees for households with incomes below 80 percent of the area median income when they purchase a home below a specified price. Much more information is available on the County's website. |
Where are these policies most applicable?
Revised impact fee structures are most likely to influence housing prices in communities experiencing rapid and significant growth. Semi-rural or exurban communities on the borders of expanding cities also may wish to consider implementation of revised impact fee structures. Times of slower development activity may represent a great opportunity to assess whether a community's impact fees are inequitable and in need of revision. Adopting an equitable impact fee schedule will help ensure that when new development does occur it proceeds in an orderly and well-planned fashion, without compromising either overall public revenue or housing affordability.
In the wake of the mortgage foreclosure crisis, some cities and counties with existing programs have temporarily suspended collections or reduced impact fee assessments. Others have delayed scheduled increases or adoption of new fees in the hopes of stimulating stalled development. Notably, in August 2009 the state of Arizona declared a moratorium on the creation of new impact fees or increases on existing fees effective through June 2011. The effects of such measures are difficult to predict, and some critics of the moratoria suggest that the tight credit market and large supply of foreclosed homes present greater obstacles to new residential development than impact fees. With tax receipts down in many communities, reduced collection of impact fees may only exacerbate existing revenue shortages. Supporters counter that reduced impact fees will stimulate new development and, in turn, create new jobs. View the "Latest News" section of ImpactFees.com to keep up to date on these trends.
Learn more about impact fees Go back to learn about other policies that help Reduce Red Tape. |
The Center for Housing Policy gratefully acknowledges the input and feedback provided for this policy section by the follwing reviewers: Thais Austin, Debra Bassert and Paul Emrath, National Association of Home Builders; Becky Koch, HSBC Bank USA. Please note, however, that the views and opinions expressed on HousingPolicy.org are those of the Center for Housing Policy alone.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
How do revised impact fee structures work?
Communities have adopted a variety of approaches to revising impact fee structures. Jurisdictions may base impact fee amounts on unit size or type, location, or density -- all features that are likely to reflect the demand for services introduced by each unit. Reducing the fees charged for smaller homes and/or homes located in areas with pre-existing infrastructure facilitates the development of more affordable homes without compromising the overall amount of revenue available to meet new infrastructure needs. Some states also authorize communities to offer full or partial impact fee waivers to developers of homes that meet specified affordability standards. To ensure there is no reduction in funding for new infrastructure, some of these jurisdictions require that the lost revenue be replaced with funds from another source.
An alternative approach is to pay for new infrastructure out of general revenue/local property taxes, rather than with impact fees. Proponents of this approach argue that it is unfair to make new residents bear the full costs of expanding infrastructure, as existing residents were not required to cover these costs when they first moved to the community. Others who share this perspective suggest that impact fees amount to an "initiation fee" imposed on new residents, and may have the effect of excluding working families who cannot afford this added cost.
On the other hand, some argue that if jurisdictions are denied the ability to charge impact fees for new development, they may not support new development at all, constricting the supply of new homes, and thereby raising housing prices.
Learn more about the continuing debate about impact fees. For an overview of the policy issues related to impact fees, and related research findings, see Impact Fees and Housing Affordability [PDF] 2005. By Vicki Been. Cityscape 8(1), pp. 139-185.
For a review of alternatives to impact fees for paying for infrastructure improvements, see the National Association of Home Builders three-part Infrastructure Series, which includes Building for Tomorrow: Innovative Infrastructure Solutions Part I, Infrastructure Finance Does Your State Encourage Innovation? Part II and Infrastructure Solutions-Best Practices from Results Oriented States Part III.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
How do revised impact fee structures work?
Communities have adopted a variety of approaches to revising impact fee structures. Jurisdictions may base impact fee amounts on unit size or type, location, or density -- all features that are likely to reflect the demand for services introduced by each unit. Reducing the fees charged for smaller homes and/or homes located in areas with pre-existing infrastructure facilitates the development of more affordable homes without compromising the overall amount of revenue available to meet new infrastructure needs. Some states also authorize communities to offer full or partial impact fee waivers to developers of homes that meet specified affordability standards. To ensure there is no reduction in funding for new infrastructure, some of these jurisdictions require that the lost revenue be replaced with funds from another source.
| Click on the links below to learn about ways communities are revising impact fee structures to help maintain the affordability of new homes: Adopt a proportionate impact fee schedule In contrast to a flat, per-unit fee structure, proportionate impact fees reflect variations in unit size, location and other features that have been shown to influence demand for services. Allow fee reductions or waivers Full or partial impact fee waivers help preserve the affordability of new homes. Some communities find alternative funding sources to offset these losses and ensure that public services infrastructure keeps pace with new development. Allow impact fees to be paid on a deferred basis By allowing payment of impact fees to be deferred until the end stages of the development process or paid over a period of years following occupancy, communities can help to reduce housing and development costs without affecting the level of services provided. Adjust fees based on existing infrastructure and service area In some areas the existing infrastructure already has adequate capacity to accommodate new homes. Lowering or eliminating impact fees in such neighborhoods helps preserve affordability and may create an extra incentive for affordable infill development. Click here to view other resources on impact fees. |
An alternative approach is to pay for new infrastructure out of general revenue/local property taxes, rather than with impact fees. Proponents of this approach argue that it is unfair to make new residents bear the full costs of expanding infrastructure, as existing residents were not required to cover these costs when they first moved to the community. Others who share this perspective suggest that impact fees amount to an "initiation fee" imposed on new residents, and may have the effect of excluding working families who cannot afford this added cost.
On the other hand, some argue that if jurisdictions are denied the ability to charge impact fees for new development, they may not support new development at all, constricting the supply of new homes, and thereby raising housing prices.
Learn more about the continuing debate about impact fees. For an overview of the policy issues related to impact fees, and related research findings, see Impact Fees and Housing Affordability [PDF] 2005. By Vicki Been. Cityscape 8(1), pp. 139-185.
For a review of alternatives to impact fees for paying for infrastructure improvements, see the National Association of Home Builders three-part Infrastructure Series, which includes Building for Tomorrow: Innovative Infrastructure Solutions Part I, Infrastructure Finance Does Your State Encourage Innovation? Part II and Infrastructure Solutions-Best Practices from Results Oriented States Part III.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Adopt a Proportionate Impact Fee Schedule
Impact fees assessed on a flat, per-unit basis divide the costs associated with new development equally among all new housing units, regardless of their individual characteristics. However, factors such as development density, location, and unit type and size can substantially influence the actual per-unit demand for certain services and infrastructure. Wastewater collection systems, for example, have been found to be less costly to operate and maintain in higher-density areas, as compared with lower-density areas. [1] Similarly, the number of school-aged children tends to be higher in single-family homes, as compared with multifamily units. [2]
There are a range of variables that may be used as the basis for a proportionate impact fee system, depending on the type of service or infrastructure needed, including the development density, proximity to existing services and the size and type of unit (e.g., single-family detached home, town home, condominium or apartment). For each of these factors, data can be used to design a proportionate impact fee schedule.
The table below, for example, uses data from the American Housing Survey to document a relationship between the type and size of a housing unit and the average number of persons per unit. As indicated, as the unit size of single family detached homes gets larger the number of occupants increases as well, leading to a greater demand for infrastructure and public services such as roadways and parks, for which usage tends to increase with occupancy levels.
For example, Kirkland, Washington, a suburb of Seattle, adopted a new transportation impact fee schedule that accounts for differences in rates of trip generation -- that is, the number of times vehicle travel from the home is initiated during peak hours -- and the average trip length for different types of housing. As indicated in the table below, because residents of multifamily and senior homes tend to use their car less frequently than residents of single-family homes, placing a lesser demand on roadways, impact fees for these types of units are lower than for detached units. Presumably, variables related to housing density and proximity to public transit -- factors which have been shown to contribute to decreased vehicle use -- could also be used as the basis for charging proportional road impact fees.
[1] Another Cost of Sprawl - The Effects of Land Use on Wastewater Utility Costs. 1998. New York, NY: National Resources Defense Council.
[2] The Case for Multifamily Housing. [PDF] 2003. By Richard M. Haughey. Second Edition. Washington, DC: Urban Land Institute.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Adopt a Proportionate Impact Fee Schedule
Impact fees assessed on a flat, per-unit basis divide the costs associated with new development equally among all new housing units, regardless of their individual characteristics. However, factors such as development density, location, and unit type and size can substantially influence the actual per-unit demand for certain services and infrastructure. Wastewater collection systems, for example, have been found to be less costly to operate and maintain in higher-density areas, as compared with lower-density areas. [1] Similarly, the number of school-aged children tends to be higher in single-family homes, as compared with multifamily units. [2]
As an alternative to the flat-rate system, some communities are structuring impact fee schedules to avoid "overcharging" homes that tend to have a smaller effect on public infrastructure demand -- many of which share characteristics associated with homes affordable to working families -- and more proportionately reflect varying levels of demand. In addition to being more equitable than a flat-rate system, this approach has the benefit of satisfying more precisely the proportionality requirements that require that exactions of this nature be tied to the expenses on which they are based. (Learn more about the rough proportionality requirement.) | Photo courtesy of Trinity Housing. |
There are a range of variables that may be used as the basis for a proportionate impact fee system, depending on the type of service or infrastructure needed, including the development density, proximity to existing services and the size and type of unit (e.g., single-family detached home, town home, condominium or apartment). For each of these factors, data can be used to design a proportionate impact fee schedule.
The table below, for example, uses data from the American Housing Survey to document a relationship between the type and size of a housing unit and the average number of persons per unit. As indicated, as the unit size of single family detached homes gets larger the number of occupants increases as well, leading to a greater demand for infrastructure and public services such as roadways and parks, for which usage tends to increase with occupancy levels.
| Type of Housing Unit | Size of the Unit in Square Feet | Average | Here is a simplified illustration of how these data could be used to vary particular impact fees by size of unit: Assume, for example, that a community determines that it needs to charge an impact fee of $2,000 per single-family detached house for an average sized home in the 2000 to 2500 square foot range, to support infrastructure and services that vary with household size. The data from this table could be applied to support a reduced fee of $1,800 for a smaller 1000 to 1500 square foot house, and an increased fee of $2,147 for a larger 3000+ square foot house. | |
| Persons per Unit | Persons per 1,000 sq ft | |||
| SF Detached | Under 1000 1000- 1500 1500- 2000 2000- 2500 2500- 3000 3000+ | 2.35 2.57 2.70 2.86 2.96 3.07 | 3.15 2.13 1.61 1.32 1.11 0.91 | |
| Source: National Association of Home Builders tabulations of data from the 2003 American Housing Survey, U.S. Census Bureau and the Department of Housing and Urban Development. Used with permission. | ||||
These adjustments reflect the ratio of 2.86 persons per unit for homes in the 2000 to 2500 square foot range to 2.57 persons per unit for homes between 1000 and 1500 square feet and 3.07 persons per unit for homes larger than 3000 square feet. While in this example, smaller homes realize a relatively modest savings of $350 compared with the largest homes, the difference in fee amounts would be much greater in jurisdictions with higher impact fees.
For example, if the amount of impact fees needed to support new infrastructure and services for an average home in the 2000 to 2500 square foot range were $50,000, the ratio above could be used as partial support for a proportional impact fee of $53,670 for units in excess of 3,000 square feet and $44,930 for 1000 to 1500 square foot homes. In this case, a proportionate impact fee based on square footage as a proxy for household size could make a substantial difference in the final cost of the home.
Some jurisdictions choose to further refine proportionate impact fees based on a combination of relevant characteristics. For example, a community may vary water impact fees by lot size and miles from a water supply facility, since water usage tends to increase on larger lots, and the cost of supplying water grows with distance. By combining unit size with other variables, it may be possible to further reduce the fees levied on affordable homes.For example, if the amount of impact fees needed to support new infrastructure and services for an average home in the 2000 to 2500 square foot range were $50,000, the ratio above could be used as partial support for a proportional impact fee of $53,670 for units in excess of 3,000 square feet and $44,930 for 1000 to 1500 square foot homes. In this case, a proportionate impact fee based on square footage as a proxy for household size could make a substantial difference in the final cost of the home.
For example, Kirkland, Washington, a suburb of Seattle, adopted a new transportation impact fee schedule that accounts for differences in rates of trip generation -- that is, the number of times vehicle travel from the home is initiated during peak hours -- and the average trip length for different types of housing. As indicated in the table below, because residents of multifamily and senior homes tend to use their car less frequently than residents of single-family homes, placing a lesser demand on roadways, impact fees for these types of units are lower than for detached units. Presumably, variables related to housing density and proximity to public transit -- factors which have been shown to contribute to decreased vehicle use -- could also be used as the basis for charging proportional road impact fees.
| Land Use* | Trip Rate | Trip Length (miles) | Fee per Unit |
| Detached Housing | 1.01 | 3.5 | $3,825 |
| Attached and Stacked Housing | 0.56 | 3.7 | $2,242 |
| Senior Housing | 0.28 | 2.8 | $1,121 |
| Nursing Home | 0.22 | 2.8 | $667 |
| Congregate Care/Assisted Living | 0.17 | 2.8 | $515 |
| *Unit of measure for all land uses is "Dwelling," except for nursing home, for which the unit of measure is "beds." Source information for trip rate and length estimates [PDF]-- Fees effective January 2009 | |||
| You are currently reading: Adopt a proportionate impact fee schedule In contrast to a flat, per-unit fee structure, proportionate impact fees reflect variations in unit size, location and other features that have been shown to influence demand for services. Other pages in this section: Allow fee reductions or waivers Full or partial impact fee waivers help preserve the affordability of new homes. Some communities find alternative funding sources to offset these losses and ensure that public services infrastructure keeps pace with new development. Allow impact fees to be paid on a deferred basis By allowing payment of impact fees to be deferred until the end stages of the development process or paid over a period of years following occupancy, communities can help to reduce housing and development costs without affecting the level of services provided. Adjust fees based on existing infrastructure and service area In some areas the existing infrastructure already has adequate capacity to accommodate new homes. Lowering or eliminating impact fees in such neighborhoods helps preserve affordability and may create an extra incentive for affordable infill development. Click here to view other resources on impact fees. |
[1] Another Cost of Sprawl - The Effects of Land Use on Wastewater Utility Costs. 1998. New York, NY: National Resources Defense Council.
[2] The Case for Multifamily Housing. [PDF] 2003. By Richard M. Haughey. Second Edition. Washington, DC: Urban Land Institute.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Allow Fee Reductions or Waivers
To help maintain housing affordability and/or stimulate development in targeted neighborhoods, some communities offer impact fee reductions for qualifying projects, or waive fees altogether. In some cases, state enabling laws require that the waived revenue be replaced with funding from another source. This replacement requirement helps to ensure that communities have sufficient funds available to meet their growing infrastructure and public service needs as impact fee revenue is reduced. While some communities use federal CDBG funds or proceeds from a local housing trust fund to fill this gap, other jurisdictions have come up with more creative strategies for replacing waived impact fee revenue. Learn more about state enabling legislation.
It is important to note that economists are still grappling with the question of who ultimately bears the expense associated with impact fees: developers, homebuyers, or land owners. If developers pass the cost of the fee on to buyers through an increase in the price of new homes, granting fee waivers should offer relief to working families. But if developers pass the cost back to land owners by reducing the amount they will pay for undeveloped lots, or if they simply absorb the charge, granting impact fee waivers may not affect the cost of homes at all. Until economists are able to ascertain which party will ultimately assume the cost of the fee, policymakers may wish to focus assuring that any waived fees go toward lowering housing costs for the homeowner.
Waive impact fees for qualifying homes
Recognizing that impact fee assessments may lead to comparable increases in home prices, some communities offer impact fee reductions or waivers for developers of affordable homes. While some jurisdictions are required by state law to replace the foregone revenue with resources from another source, others can decide whether or not to impose this requirement.
Albuquerque, New Mexico began phasing in impact fees in July 2005, charging 34 percent of the proposed fee in the first year, 67 percent in the second, and 100 percent of the full cost beginning in 2007. In addition to varying fees based on the level of infrastructure already in place, the City allows fee waivers for certain types of development, including affordable housing. Specifically, the city waives impact fees completely for owner-occupied housing that is affordable to households earning 80 percent or less of the area median income and located in targeted redevelopment areas. New affordable homes in areas zoned for higher-density, mixed-use and mixed-income development are also eligible for impact fee waivers. All homes that receive an impact fee waiver are subject to a 5-year deed restriction, which ensures that the units remain affordable to qualifying families during this period.
The City also substantially reduces fees (up to 70 percent) for new industrial, manufacturing, institutional, and office development that helps promote a jobs-housing balance in primarily residential areas of the city. To the extent that such fee reductions bring commercial development to these neighborhoods, this policy can help address housing affordability issues by reducing commuting costs for area employees. Click here to learn more about impact fees in Albuquerque.
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Offer forgivable loans or silent second mortgages to qualifying families
To ensure that working families benefit from impact fee waivers, some communities continue to assess impact fees on developers but provide a forgivable loan or silent second mortgage in the amount of the fee directly to eligible homebuyers. This approach assumes that developers simply add the impact fee amount to the price of the home, and provides equivalent assistance to the homebuyer to balance out the added cost.
The homebuyer is not required to make payments on either a silent second or a forgivable loan. The silent second mortgage is paid off with proceeds from the sale of the house when the new homebuyer sells, and the forgivable loan is forgiven by a certain percentage each year until it is eventually completely forgiven. If the new homebuyer sells before it is completely forgiven, they pay off the remaining balance of the loan off with proceeds from the sale of their house. By allocating funds from a separate source to the home buyer, local governments can ensure that working families get the same benefit that may be achieved through a fee waiver without taking the risk that the benefits of the fee waiver may not be passed on to working families.
In Alachua County, Florida, income-eligible homebuyers may enroll in the Impact Fee Assistance Program to receive an interest-free second mortgage on their new home from the County, in an amount equivalent to the cost of the impact fees. Recipients are required to repay a portion of the loan if they refinance, sell, or rent their home within five years of purchase. The program is funded through appropriations from the County's general revenue fund. To qualify, households must earn less than 100 percent of the area median income, and the home price must be below an annually-adjusted sales price threshold (currently $258,000). Click here to learn more about the Impact Fee Assistance Program in Alachua County.
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Adopt a recoupment policy
Atlanta, Georgia* uses impact fee waivers and reductions to promote affordability and development in targeted parts of the region, and iis unique in its use of a recoupment strategy to replace revenue lost to fee waivers. Homes located within Enterprise Zones or Empowerment Zones are entitled to receive a full waiver of impact fees, and new development within 1,000 feet of a rail transit station receives a 50 percent impact fee reduction. Impact fees also may be waived or reduced if the unit meets regional affordability thresholds. A 100 percent impact fee reduction is given for homes renting at or below 60 percent of the regional median rent, or selling for less than 1.5 times the regional sales price for new homes. A 50 percent impact fee reduction is given for homes with rents between 60 and 80 percent of the regional median rent, or selling for between 1.5 and 2.5 times the regional sales price for new homes.
In Georgia, as in some other states, state law requires that the lost revenue associated with waived impact fees be substituted with funds from another source. Atlanta has addressed this requirement by putting in place a fee "recoupment" strategy. According to Georgia state law, communities that adopt impact fees for parks, police and fire safety, and other public services and infrastructure must define a standard "level of service" that compares the existing demand for public services with the local capacity to provide those services (i.e., prior to the implementation of impact fees the jurisdiction provided 470 square feet of fire station space per 1,000 residents). Impact fees levied on new development should be used to maintain this standard level of service, but may not be assessed at a rate intended to achieve a higher ratio unless the local government is able to find other funds to achieve that higher standard in existing neighborhoods, as well.
In designing its impact fee schedule, however, officials in Atlanta determined that the city was already well-equipped to accommodate projected growth through 2010 and set the city's standard level of service at a rate that was lower than the ratio already in place. For example, prior to implementing an impact fee system city officials found that Atlanta had almost 7 acres of park per 1,000 residents -- a ratio they determined to be more than enough to accommodate existing residents. Rather than adopting the then-current ratio as the standard, they set the level of service standard at a much-lower 5.75 acres per resident. This adjustment had the effect of automatically building in excess service capacity to accommodate future growth.
Because the City's capacity to deliver public services exceeded the standard level of service from the start, impact fee revenue could be used for a variety of alternative purposes, including recouping the earlier investments that led to the surplus or offsetting the fee waivers and reductions granted to affordable housing developments. In Atlanta, affordable housing offsets typically consume about 25 percent of recoupment-based fee revenues; left-over funds are used to recover the cost of previous infrastructure outlays and further expand service capacity.
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* This example is drawn from Impact Fees and Housing Affordability -- A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing & Urban Development.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Allow Fee Reductions or Waivers
To help maintain housing affordability and/or stimulate development in targeted neighborhoods, some communities offer impact fee reductions for qualifying projects, or waive fees altogether. In some cases, state enabling laws require that the waived revenue be replaced with funding from another source. This replacement requirement helps to ensure that communities have sufficient funds available to meet their growing infrastructure and public service needs as impact fee revenue is reduced. While some communities use federal CDBG funds or proceeds from a local housing trust fund to fill this gap, other jurisdictions have come up with more creative strategies for replacing waived impact fee revenue. Learn more about state enabling legislation.
It is important to note that economists are still grappling with the question of who ultimately bears the expense associated with impact fees: developers, homebuyers, or land owners. If developers pass the cost of the fee on to buyers through an increase in the price of new homes, granting fee waivers should offer relief to working families. But if developers pass the cost back to land owners by reducing the amount they will pay for undeveloped lots, or if they simply absorb the charge, granting impact fee waivers may not affect the cost of homes at all. Until economists are able to ascertain which party will ultimately assume the cost of the fee, policymakers may wish to focus assuring that any waived fees go toward lowering housing costs for the homeowner.
In places with excess infrastructure capacity that is sufficient to accommodate future population growth, impact fee payments may be used to recoup earlier investments that led to the surplus or to offset the revenue lost by reducing or waiving fees for affordable housing. | ||||
| You are currently reading: Allow fee reductions or waivers Working families benefit from impact fee waivers, some communities transfer the benefit of the waiver directly to homebuyers, often in the form of a second mortgage or forgivable loan. Other pages in this section: Adopt a proportionate impact fee schedule In contrast to a flat, per-unit fee structure, proportionate impact fees reflect variations in unit size, location and other features that have been shown to influence demand for services. Allow impact fees to be paid on a deferred basis By allowing payment of impact fees to be deferred until the end stages of the development process or paid over a period of years following occupancy, communities can help to reduce housing and development costs without affecting the level of services provided. Adjust fees based on existing infrastructure and service area In some areas the existing infrastructure already has adequate capacity to accommodate new homes. Lowering or eliminating impact fees in such neighborhoods helps preserve affordability and may create an extra incentive for affordable infill development. Click here to view other resources on impact fees. |
Waive impact fees for qualifying homes
Recognizing that impact fee assessments may lead to comparable increases in home prices, some communities offer impact fee reductions or waivers for developers of affordable homes. While some jurisdictions are required by state law to replace the foregone revenue with resources from another source, others can decide whether or not to impose this requirement.
Albuquerque, New Mexico began phasing in impact fees in July 2005, charging 34 percent of the proposed fee in the first year, 67 percent in the second, and 100 percent of the full cost beginning in 2007. In addition to varying fees based on the level of infrastructure already in place, the City allows fee waivers for certain types of development, including affordable housing. Specifically, the city waives impact fees completely for owner-occupied housing that is affordable to households earning 80 percent or less of the area median income and located in targeted redevelopment areas. New affordable homes in areas zoned for higher-density, mixed-use and mixed-income development are also eligible for impact fee waivers. All homes that receive an impact fee waiver are subject to a 5-year deed restriction, which ensures that the units remain affordable to qualifying families during this period.
The City also substantially reduces fees (up to 70 percent) for new industrial, manufacturing, institutional, and office development that helps promote a jobs-housing balance in primarily residential areas of the city. To the extent that such fee reductions bring commercial development to these neighborhoods, this policy can help address housing affordability issues by reducing commuting costs for area employees. Click here to learn more about impact fees in Albuquerque.
Back to top
Offer forgivable loans or silent second mortgages to qualifying families
To ensure that working families benefit from impact fee waivers, some communities continue to assess impact fees on developers but provide a forgivable loan or silent second mortgage in the amount of the fee directly to eligible homebuyers. This approach assumes that developers simply add the impact fee amount to the price of the home, and provides equivalent assistance to the homebuyer to balance out the added cost.
The homebuyer is not required to make payments on either a silent second or a forgivable loan. The silent second mortgage is paid off with proceeds from the sale of the house when the new homebuyer sells, and the forgivable loan is forgiven by a certain percentage each year until it is eventually completely forgiven. If the new homebuyer sells before it is completely forgiven, they pay off the remaining balance of the loan off with proceeds from the sale of their house. By allocating funds from a separate source to the home buyer, local governments can ensure that working families get the same benefit that may be achieved through a fee waiver without taking the risk that the benefits of the fee waiver may not be passed on to working families.
In Alachua County, Florida, income-eligible homebuyers may enroll in the Impact Fee Assistance Program to receive an interest-free second mortgage on their new home from the County, in an amount equivalent to the cost of the impact fees. Recipients are required to repay a portion of the loan if they refinance, sell, or rent their home within five years of purchase. The program is funded through appropriations from the County's general revenue fund. To qualify, households must earn less than 100 percent of the area median income, and the home price must be below an annually-adjusted sales price threshold (currently $258,000). Click here to learn more about the Impact Fee Assistance Program in Alachua County.
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Adopt a recoupment policy
Atlanta, Georgia* uses impact fee waivers and reductions to promote affordability and development in targeted parts of the region, and iis unique in its use of a recoupment strategy to replace revenue lost to fee waivers. Homes located within Enterprise Zones or Empowerment Zones are entitled to receive a full waiver of impact fees, and new development within 1,000 feet of a rail transit station receives a 50 percent impact fee reduction. Impact fees also may be waived or reduced if the unit meets regional affordability thresholds. A 100 percent impact fee reduction is given for homes renting at or below 60 percent of the regional median rent, or selling for less than 1.5 times the regional sales price for new homes. A 50 percent impact fee reduction is given for homes with rents between 60 and 80 percent of the regional median rent, or selling for between 1.5 and 2.5 times the regional sales price for new homes.
In Georgia, as in some other states, state law requires that the lost revenue associated with waived impact fees be substituted with funds from another source. Atlanta has addressed this requirement by putting in place a fee "recoupment" strategy. According to Georgia state law, communities that adopt impact fees for parks, police and fire safety, and other public services and infrastructure must define a standard "level of service" that compares the existing demand for public services with the local capacity to provide those services (i.e., prior to the implementation of impact fees the jurisdiction provided 470 square feet of fire station space per 1,000 residents). Impact fees levied on new development should be used to maintain this standard level of service, but may not be assessed at a rate intended to achieve a higher ratio unless the local government is able to find other funds to achieve that higher standard in existing neighborhoods, as well.
In designing its impact fee schedule, however, officials in Atlanta determined that the city was already well-equipped to accommodate projected growth through 2010 and set the city's standard level of service at a rate that was lower than the ratio already in place. For example, prior to implementing an impact fee system city officials found that Atlanta had almost 7 acres of park per 1,000 residents -- a ratio they determined to be more than enough to accommodate existing residents. Rather than adopting the then-current ratio as the standard, they set the level of service standard at a much-lower 5.75 acres per resident. This adjustment had the effect of automatically building in excess service capacity to accommodate future growth.
Because the City's capacity to deliver public services exceeded the standard level of service from the start, impact fee revenue could be used for a variety of alternative purposes, including recouping the earlier investments that led to the surplus or offsetting the fee waivers and reductions granted to affordable housing developments. In Atlanta, affordable housing offsets typically consume about 25 percent of recoupment-based fee revenues; left-over funds are used to recover the cost of previous infrastructure outlays and further expand service capacity.
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* This example is drawn from Impact Fees and Housing Affordability -- A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing & Urban Development.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Allow Impact Fees to be Paid on a Deferred Basis
While many communities collect impact fees upon approval of a development site plan or issue of a building permit, setting payment due dates this early in the development process results in additional carrying costs for the developer or home builder (see Sidebar). These costs will likely be passed on to new residents in the form of higher home prices, without a corresponding increase in the level of services provided. To mitigate additional increases in home prices caused by early collection of impact fees, some communities allow deferral of payment until the issue of a Certificate of Occupancy or at the final inspection. This may be one option for communities that are considering waiving impact fees in the face of an economic slowdown. As of March 2010, San Francisco's Mayor Newsom had proposed allowing developers to defer payment of impact fees until after projects have been completed or sold, reducing upfront costs and, potentially, encouraging job creation. Instead of losing potential revenue, deferral of payment may allow communities to assist struggling projects while not losing revenue for infrastructure needs.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Allow Impact Fees to be Paid on a Deferred Basis
While many communities collect impact fees upon approval of a development site plan or issue of a building permit, setting payment due dates this early in the development process results in additional carrying costs for the developer or home builder (see Sidebar). These costs will likely be passed on to new residents in the form of higher home prices, without a corresponding increase in the level of services provided. To mitigate additional increases in home prices caused by early collection of impact fees, some communities allow deferral of payment until the issue of a Certificate of Occupancy or at the final inspection. This may be one option for communities that are considering waiving impact fees in the face of an economic slowdown. As of March 2010, San Francisco's Mayor Newsom had proposed allowing developers to defer payment of impact fees until after projects have been completed or sold, reducing upfront costs and, potentially, encouraging job creation. Instead of losing potential revenue, deferral of payment may allow communities to assist struggling projects while not losing revenue for infrastructure needs.
| Alternatively,
Capacity Unit Assessment (CUA) programs may be used to reduce the cost
barriers imposed by impact fees by allowing payments for the
infrastructure associated with new development to be spread out over
time. Rather than charging home builders an up-front per-unit fee -- which is often passed on to buyers through an increase in home prices -- local governments finance the costs of the new infrastructure, typically through the sale of bonds. Buyers of the new homes then pay an annual tax surcharge, over a defined number of years, to service this debt. While there are generally additional administrative fees and interest charges associated with collecting payments over time, working families benefit from the ability to spread costs over the life of the CUA, which may be up to twenty or more years.
| How does early collection of impact fees affect home prices? Carrying costs, also called holding costs, are the ongoing expenses associated with maintaining a product inventory -- in this case, homes -- over time. These "soft" costs include items such as insurance payments, property taxes, and the cost of financing. Collecting impact fees very early in the development process can result in additional carrying costs that eventually get passed on to residents in the form of higher home prices. Builders and developers also incur higher carrying costs when they take on additional debt to cover payment of impact fees long before a property is sold, as interest due on the loan adds up over a longer period of time. Home buyers are affected by additional carrying costs -- not only through increased home prices, but also through additional increases in closing costs, which are typically assessed as a percentage of the total home price. | |||
| You are currently reading: Allow impact fees to be paid on a deferred basis By allowing payment of impact fees to be deferred until the end stages of the development process or paid over a period of years following occupancy, communities can help to reduce housing and development costs without affecting the level of services provided. Other pages in this section: Adopt a proportionate impact fee schedule In contrast to a flat, per-unit fee structure, proportionate impact fees reflect variations in unit size, location and other features that have been shown to influence demand for services. Allow fee reductions or waivers Full or partial impact fee waivers help preserve the affordability of new homes. Some communities find alternative funding sources to offset these losses and ensure that public services infrastructure keeps pace with new development. Adjust fees based on existing infrastructure and service area In some areas the existing infrastructure already has adequate capacity to accommodate new homes. Lowering or eliminating impact fees in such neighborhoods helps preserve affordability and may create an extra incentive for affordable infill development. Click here to view other resources on impact fees. |
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Adjust Impact Fees Based on Available Infrastructure and Service Area
currently
have the capacity to accommodate projected growth. The six impact fee
areas are not as well-developed, and will require varying levels of
infrastructure improvements as the city continues to grow. Across each
of these fee areas, charges associated with new development vary
depending on the need for new facilities spurred by new development.
Net fees charged on a new single-family home in one of the impact fee
areas range from a low of $6,631 to a high of $17,765 in areas
requiring considerable new investment. By more precisely defining
service areas for impact fees, communities can ensure that rates remain
low for homes in well-served neighborhoods. Click here to learn more about Phoenix's impact fees.
[1] Note that some critics of impact fees argue that these fees can actually lead to sprawl when unevenly adopted across regions. To the extent that developers seek out jurisdictions that do not impose impact fees, and "leapfrog" over those that do, development may not proceed in an orderly, well-planned fashion.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Adjust Impact Fees Based on Available Infrastructure and Service Area
| When
designing an impact fee schedule, many localities apply the same fee
rates throughout the entire jurisdiction. However, denser parts of a
city or county often have better-developed infrastructure than areas on
the fringe. When infrastructure availability is uneven across a
jurisdiction, some local governments choose to sub-divide the
jurisdiction into smaller "service areas" with fees within each service
area varying depending on existing infrastructure capacity. These
jurisdictions charge lower impact fees in sub-areas requiring fewer
infrastructure improvements to accommodate new growth. This tiered fee
schedule not only facilitates the development of more affordable homes
but also helps to discourage development in fringe areas that leads to
increased sprawl. [1] Officials in Phoenix, Arizona, for example, have divided the city into eight "feeless" areas and six areas where impact fees are charged. "Feeless" areas are those in which existing public facilities | Photo courtesy of Arizona Department of Housing |
| You are currently reading: Adjust fees based on existing infrastructure and service area In some areas the existing infrastructure already has adequate capacity to accommodate new homes. Lowering or eliminating impact fees in such neighborhoods helps preserve affordability and may create an extra incentive for affordable infill development. Other pages in this section: Adopt a proportionate impact fee schedule In contrast to a flat, per-unit fee structure, proportionate impact fees reflect variations in unit size, location and other features that have been shown to influence demand for services. Allow fee reductions or waivers Full or partial impact fee waivers help preserve the affordability of new homes. Some communities find alternative funding sources to offset these losses and ensure that public services infrastructure keeps pace with new development. Allow impact fees to be paid on a deferred basis By allowing payment of impact fees to be deferred until the end stages of the development process or paid over a period of years following occupancy, communities can help to reduce housing and development costs without affecting the level of services provided. Click here to view other resources on impact fees. |
[1] Note that some critics of impact fees argue that these fees can actually lead to sprawl when unevenly adopted across regions. To the extent that developers seek out jurisdictions that do not impose impact fees, and "leapfrog" over those that do, development may not proceed in an orderly, well-planned fashion.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Legal Issues Related to Impact Fees
This page discusses some of the basic legal requirements and tests associated with the imposition of impact fees. These include:
Rational nexus and proportionality
Impact fees are a type of "exaction" -- a requirement that developers pay for, or provide, a public facility or public good in order to receive permission to undertake a proposed project. Other types of exactions include linkage fees or the dedication of land for a park, school, or roads. The legal basis for imposing an exaction has been established through several United States Supreme Court cases, most notably Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 687 (1994). These cases have established two tests that must be met to ensure the legality of an impact fee: there must be a "rational nexus" between the imposition of the fee and the achievement of a legitimate public purpose (usually, the need for new infrastructure to serve the development) and the amount of the fee must be "roughly proportionate" to the impact of the proposed development.
To meet the rational nexus test, a local government must be able to demonstrate that there is a reasonable connection between the need for new public infrastructure to be funded by impact fees, the new development on which those fees are levied, and the benefits obtained by the development as a result of paying the fees. Impact fee revenue can only be used to finance infrastructure and facilities that will benefit new development, and must be spent within a reasonable time frame (most places require that fee revenue be spent within 6 years or refunded to the payer). To meet the rough proportionality standard, a local government must show that the impact fee amount is roughly proportional to the impact of the project; that is, that the fee is roughly related to the actual costs of new infrastructure associated with the proposed development.
For more information see Practical Issues in Adopting Local Impact Fees. 1993. By Jerry Kolo and Todd J. Dicker. State and Local Government Review 25(3): pp. 197-206.
Click here to continue learning about proportionate impact fee schedules.
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State enabling legislation
In some states, specific enabling legislation has been passed to give local governments the authority to adopt impact fees; however, enabling legislation is not a required prerequisite for enactment of a fee in every state. In the 24 states that have not passed an enabling act, communities can use their home rule power, or authority established through case law or special legislative acts, to adopt impact fees.
For more details about state enabling acts for the imposition of impact fees see Impact Fees: Equity and Housing Affordability. A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing and Urban Development, Chapter 3.
Continue learning about fee reductions and waivers, or click here to learn more about state enabling legislation in general.
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Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Legal Issues Related to Impact Fees
This page discusses some of the basic legal requirements and tests associated with the imposition of impact fees. These include:
Rational nexus and proportionality
Impact fees are a type of "exaction" -- a requirement that developers pay for, or provide, a public facility or public good in order to receive permission to undertake a proposed project. Other types of exactions include linkage fees or the dedication of land for a park, school, or roads. The legal basis for imposing an exaction has been established through several United States Supreme Court cases, most notably Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 687 (1994). These cases have established two tests that must be met to ensure the legality of an impact fee: there must be a "rational nexus" between the imposition of the fee and the achievement of a legitimate public purpose (usually, the need for new infrastructure to serve the development) and the amount of the fee must be "roughly proportionate" to the impact of the proposed development.
To meet the rational nexus test, a local government must be able to demonstrate that there is a reasonable connection between the need for new public infrastructure to be funded by impact fees, the new development on which those fees are levied, and the benefits obtained by the development as a result of paying the fees. Impact fee revenue can only be used to finance infrastructure and facilities that will benefit new development, and must be spent within a reasonable time frame (most places require that fee revenue be spent within 6 years or refunded to the payer). To meet the rough proportionality standard, a local government must show that the impact fee amount is roughly proportional to the impact of the project; that is, that the fee is roughly related to the actual costs of new infrastructure associated with the proposed development.
For more information see Practical Issues in Adopting Local Impact Fees. 1993. By Jerry Kolo and Todd J. Dicker. State and Local Government Review 25(3): pp. 197-206.
Click here to continue learning about proportionate impact fee schedules.
Back to top
State enabling legislation
In some states, specific enabling legislation has been passed to give local governments the authority to adopt impact fees; however, enabling legislation is not a required prerequisite for enactment of a fee in every state. In the 24 states that have not passed an enabling act, communities can use their home rule power, or authority established through case law or special legislative acts, to adopt impact fees.
For more details about state enabling acts for the imposition of impact fees see Impact Fees: Equity and Housing Affordability. A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing and Urban Development, Chapter 3.
Continue learning about fee reductions and waivers, or click here to learn more about state enabling legislation in general.
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Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
The Continuing Debate about Impact Fees
There is little consensus among practitioners and economists about the cost implications of impact fees and impact fee waivers. Implicit in many state and local policies granting impact fee waivers to developers of affordable housing is an assumption that the charges imposed by impact fees are passed along to buyers through increases in home prices. Fee waivers are intended to mitigate the impact of these increases.
Some economists, however, argue that in a competitive housing market waiving impact fees may not bring down the sales price of housing. Because the market price is set based on the expectation that impact fees will be paid, it does not necessarily follow that a home for which a fee has been waived will end up selling for below that market price. This is why many communities impose maximum sales price limits or income limits on the families residing in waived homes, or provide the benefit of the waiver directly to the family in the form of a forgivable loan or a silent second mortgage.
Other researchers suggest that impact fees may drive up housing prices, not only because developers pass the cost of the fee on to homebuyers, but also because developers will choose to build in communities that do not impose fees. As the supply of available homes in areas charging fees declines relative to growing demand, housing costs in those areas will rise in response. Critics of this argument respond that impact fees allow development to occur in places that would not otherwise permit growth, such as communities with long backlogs of infrastructure that must be completed before new construction can be accommodated.
By assigning the costs of new development to new residents, impact fees also may help alleviate NIMBY opposition that can stall or prevent projects from being approved and built. These lines of reasoning suggest that impact fees may actually expand supply, rather than constrict it.
Still other economists argue that once impact fees have been established, developers will adjust downward the price they are willing to pay for land, placing the burden of the fee on the owners of raw land, rather than the eventual homebuyer. For example, a developer may pay $100,000 for raw land that is not subject to development impact fees, but will pay only $90,000 if the property is subject to a $10,000 impact fee for new development. While the developer will technically still pay the $10,000 impact fee upon development of the property, they have in essence passed the cost of the fee to the land owner. If this is true, fee waivers and reductions may not be necessary to achieve more affordable housing.
For a thorough discussion of the potential price impacts of impact fees, see Impact Fees and Housing Affordability. 2005. By Vicki Been. Cityscape 8(1): pp. 139-185. See also An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets. 2002. By Keith R. Ihlanfeldt and Timothy M. Shaughnessy. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.
Click here to continue learning about impact fees.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
The Continuing Debate about Impact Fees
There is little consensus among practitioners and economists about the cost implications of impact fees and impact fee waivers. Implicit in many state and local policies granting impact fee waivers to developers of affordable housing is an assumption that the charges imposed by impact fees are passed along to buyers through increases in home prices. Fee waivers are intended to mitigate the impact of these increases.
Some economists, however, argue that in a competitive housing market waiving impact fees may not bring down the sales price of housing. Because the market price is set based on the expectation that impact fees will be paid, it does not necessarily follow that a home for which a fee has been waived will end up selling for below that market price. This is why many communities impose maximum sales price limits or income limits on the families residing in waived homes, or provide the benefit of the waiver directly to the family in the form of a forgivable loan or a silent second mortgage.
Other researchers suggest that impact fees may drive up housing prices, not only because developers pass the cost of the fee on to homebuyers, but also because developers will choose to build in communities that do not impose fees. As the supply of available homes in areas charging fees declines relative to growing demand, housing costs in those areas will rise in response. Critics of this argument respond that impact fees allow development to occur in places that would not otherwise permit growth, such as communities with long backlogs of infrastructure that must be completed before new construction can be accommodated.
By assigning the costs of new development to new residents, impact fees also may help alleviate NIMBY opposition that can stall or prevent projects from being approved and built. These lines of reasoning suggest that impact fees may actually expand supply, rather than constrict it.
Still other economists argue that once impact fees have been established, developers will adjust downward the price they are willing to pay for land, placing the burden of the fee on the owners of raw land, rather than the eventual homebuyer. For example, a developer may pay $100,000 for raw land that is not subject to development impact fees, but will pay only $90,000 if the property is subject to a $10,000 impact fee for new development. While the developer will technically still pay the $10,000 impact fee upon development of the property, they have in essence passed the cost of the fee to the land owner. If this is true, fee waivers and reductions may not be necessary to achieve more affordable housing.
For a thorough discussion of the potential price impacts of impact fees, see Impact Fees and Housing Affordability. 2005. By Vicki Been. Cityscape 8(1): pp. 139-185. See also An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets. 2002. By Keith R. Ihlanfeldt and Timothy M. Shaughnessy. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.
Click here to continue learning about impact fees.
Goal: Increase the Availability of Affordable Homes
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Key Resources
The following is a list of key resources on topics related to impact fees. If you're aware of other resources that should be added, please contact us.
Websites
The American Planning Association Policy Guide on Impact Fees provides a brief description of impact fees and how jurisdictions are using them, and outlines the APA's policy position on impact fees.
Duncan Associates' Online Impact Fee Resource makes available to the public the expertise of Duncan Associates, a planning consulting firm. The website includes an archive of newspaper articles related to impact fees, as well as a wealth of searchable state and local information.
The National Association of Realtors Field Guide to Development Impact Fees includes links to resources about impact fees. The "Impact Fee Basics Section" provides links to documents that explain how impact fees work. The "Impact of Impact Fees" section links to information on the economic impact of impact fees on housing affordability. The site also includes a list of e-books and research reports available for purchase.
Articles & Reports
An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets. 2002. By Keith R. Ihlanfeldt and Timothy M. Shaughnessy. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.
The authors present empirical evidence of the effect of impact fees on the prices of new and existing single-family homes, as well as undeveloped residential land, in Dade County, Florida. Their findings show that for every $1.00 increase in County fee costs, the price of homes increased by $1.60. The authors suggest that this increase is roughly equivalent to property tax savings achieved by homeowners. Ihlanfeldt and Shaughnessy also found that the price of land fell by $1.00 for every $1.00 increase in fees, an adjustment they attribute to developers' uncertainty about future fee increases.
How Development Impact Fees Affect Residential Development. 2002. By John G. Rappa. OLR Research Report. Connecticut General Assembly.
This report reviews both theoretical and empirical literature exploring the effects of impact fees on construction costs and housing markets. It includes a summary chart of how impact fees may affect land owners, developers, and new home buyers in different types of markets, as well as a chart summarizing the results of the empirical studies reviewed.
Impact Fees and Housing Affordability -- A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing and Urban Development.
This comprehensive report provides a basic overview of impact fees and other capital facility and infrastructure financing options. Authors of the report discuss the benefits of charging impact fees on the basis of unit size as measured by square footage. The report also includes decision trees to help representatives of local governments choose financing options and design fee structures.
Impact Fees and Housing Affordability. 2005. By Vicki Been. Cityscape 8(1): pp. 139-185.
Been examines possible price effects of impact fees, reviews associated literature, and identifies research needs related to impact fees. The article also identifies how and where impact fees are being used, and notes pros and cons of adopting impact fees.
Paying for Prosperity: Impact Fees and Job Growth. 2003. By Arthur C. Nelson and Mitch Moody. Washington, DC: The Brookings Institution.
This report examines the effects of impact fees on provision of infrastructure, buildable land supply, housing costs, and job growth.
Planning Implementation Tools: Impact Fees. [PDF] 2007. University of Wisconsin Center for Land Use Education.
This report describes the use of impact fees as a development tool, with a particular emphasis on Wisconsin. It includes a "report card" grading impact fees in terms of cost, public acceptance, political acceptance, equity, administration, and scale.
The Effects of Impact Fees on Multifamily Housing Construction. [PDF] 2005. By Gregory Burge and Keith Ihlanfeldt. Florida State University DeVoe Moore Center and Department of Economics. Prepared for the 2005 Florida State University Critical Issues Symposium "State and Local Government Regulations and Economic Development," March 4-5, 2005.
This report studies the effects of different types of impact fees on multifamily housing construction in Florida counties. The authors found that water/sewer impact fees reduced multifamily housing contruction, while other types of impact fees increased multifamily housing construction in suburban areas.
Go back to the Impact Fees main page.
Role: Reduce Red Tape
Policy: Revise Impact Fee Structures
Key Resources
The following is a list of key resources on topics related to impact fees. If you're aware of other resources that should be added, please contact us.
Websites
The American Planning Association Policy Guide on Impact Fees provides a brief description of impact fees and how jurisdictions are using them, and outlines the APA's policy position on impact fees.
Duncan Associates' Online Impact Fee Resource makes available to the public the expertise of Duncan Associates, a planning consulting firm. The website includes an archive of newspaper articles related to impact fees, as well as a wealth of searchable state and local information.
The National Association of Realtors Field Guide to Development Impact Fees includes links to resources about impact fees. The "Impact Fee Basics Section" provides links to documents that explain how impact fees work. The "Impact of Impact Fees" section links to information on the economic impact of impact fees on housing affordability. The site also includes a list of e-books and research reports available for purchase.
Articles & Reports
An Empirical Investigation of the Effects of Impact Fees on Housing and Land Markets. 2002. By Keith R. Ihlanfeldt and Timothy M. Shaughnessy. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.
The authors present empirical evidence of the effect of impact fees on the prices of new and existing single-family homes, as well as undeveloped residential land, in Dade County, Florida. Their findings show that for every $1.00 increase in County fee costs, the price of homes increased by $1.60. The authors suggest that this increase is roughly equivalent to property tax savings achieved by homeowners. Ihlanfeldt and Shaughnessy also found that the price of land fell by $1.00 for every $1.00 increase in fees, an adjustment they attribute to developers' uncertainty about future fee increases.
How Development Impact Fees Affect Residential Development. 2002. By John G. Rappa. OLR Research Report. Connecticut General Assembly.
This report reviews both theoretical and empirical literature exploring the effects of impact fees on construction costs and housing markets. It includes a summary chart of how impact fees may affect land owners, developers, and new home buyers in different types of markets, as well as a chart summarizing the results of the empirical studies reviewed.
Impact Fees and Housing Affordability -- A Guide for Practitioners. 2008. By Liza K. Bowles and Arthur C. Nelson. Prepared for the U.S. Department of Housing and Urban Development.
This comprehensive report provides a basic overview of impact fees and other capital facility and infrastructure financing options. Authors of the report discuss the benefits of charging impact fees on the basis of unit size as measured by square footage. The report also includes decision trees to help representatives of local governments choose financing options and design fee structures.
Impact Fees and Housing Affordability. 2005. By Vicki Been. Cityscape 8(1): pp. 139-185.
Been examines possible price effects of impact fees, reviews associated literature, and identifies research needs related to impact fees. The article also identifies how and where impact fees are being used, and notes pros and cons of adopting impact fees.
Paying for Prosperity: Impact Fees and Job Growth. 2003. By Arthur C. Nelson and Mitch Moody. Washington, DC: The Brookings Institution.
This report examines the effects of impact fees on provision of infrastructure, buildable land supply, housing costs, and job growth.
Planning Implementation Tools: Impact Fees. [PDF] 2007. University of Wisconsin Center for Land Use Education.
This report describes the use of impact fees as a development tool, with a particular emphasis on Wisconsin. It includes a "report card" grading impact fees in terms of cost, public acceptance, political acceptance, equity, administration, and scale.
The Effects of Impact Fees on Multifamily Housing Construction. [PDF] 2005. By Gregory Burge and Keith Ihlanfeldt. Florida State University DeVoe Moore Center and Department of Economics. Prepared for the 2005 Florida State University Critical Issues Symposium "State and Local Government Regulations and Economic Development," March 4-5, 2005.
This report studies the effects of different types of impact fees on multifamily housing construction in Florida counties. The authors found that water/sewer impact fees reduced multifamily housing contruction, while other types of impact fees increased multifamily housing construction in suburban areas.
Go back to the Impact Fees main page.