Understanding Impact Fees

Jurisdictions across the U.S. have taken to charging impact fees on new developments. These fees are designed to cover the cost of utilities, schools, roads, parks and other community amenities that form the public infrastructure. Contractors may already be aware of these fees, but homeowners looking at floor plans should, too, as they can become reflected in the overall cost of a newly built home.

History of impact fees
According to the National Association of Home Builders, impact fees started in the 1970s in Florida and California as a funding source in light of federal aid cutbacks. Since then, they have become a resort for communities across the country in need of money to immediately improve public infrastructure, as well as those that have been unable to procure the necessary funding through regular bureaucratic channels. The context and legality of impact fees is a complex issue that  has spawned into a handbook from the NAHB that is more than 100 pages long. However, what homeowners and contractors both need to know is that impact fees are now a common occurrence. Developers and builders need to know about the impact fee for their projects and figure out how to offset those costs. Homeowners should understand that impact fees translate into higher home prices depending on where they build.

Impact fees across regions
‚ÄčThe latest survey concerning national impact fees comes from Duncan Associates in 2012, which compiled states' average impact fees. California had the highest of any state, with impact fees totaling $31,014 on average. The next highest impact fees were found mainly in the western and mid-Atlantic regions of the country, with Washington, Oregon, Montana, Virginia, Maryland and West Virginia all having average mpact fees between $10,000 and $17,000. Conversely, much of the Mid-West and Northeastern regions of the country had impact fees under $4,000 or none at all. Some of those without fees included Mississippi, Alabama, Maine, New York, Massachusetts, both Dakotas and Michigan.

Understanding the effects
The NAHB noted that the earlier a developer or builder knows the impact fee, the sooner he or she can adjust the cost of a home. Waiting too long could mean incurring the cost and losing out on a profit margin. Homeowners, on the other hand, will want to know impact fees to know how greatly the cost of the home is affected. They should also note that impact fees will change across jurisdictions, meaning choice of lot could determine the affordability of certain home projects or even of the home plans themselves.