Impact fee

Impact fees are one-time charges on new development, levied to fund the public infrastructure that development will use. They are distinct from permit fees: permit fees pay the building department to do its job, impact fees pay for roads, schools, parks, and utility capacity.

Why they are worth knowing about early

On new residential construction, impact fees frequently exceed every other permitting cost combined. Totals in the tens of thousands of dollars per dwelling unit are ordinary in high-growth areas. A project budgeted without them is materially under-budgeted.

What they typically cover

• Transportation and roads
• Schools
• Parks and recreation
• Fire and police facilities
• Water and sewer capacity, sometimes charged separately as connection or capacity fees

Each is calculated separately, often by different agencies, and the building department may collect on their behalf or may simply require proof of payment before issuing.

What triggers them

New dwelling units and net new demand. Adding a unit triggers them. Converting a garage into an accessory dwelling unit triggers them, which surprises many owners. Renovating existing space without adding units usually does not.

Credits and timing

Redevelopment of a site that previously had units often earns a credit for the demand that already existed, which can substantially reduce the assessment. Timing varies too: some jurisdictions collect at permit issuance, others at certificate of occupancy, and a few offer deferral programs. Because the amounts are large, both the credit and the timing are worth asking about specifically.