Assessing the Cost of Impact Fees on Affordable Housing: An Analysis of Low-Income Housing Tax Credit Projects in California
Published On February 10, 2026
Building new affordable housing in California has always been complex, but costs have risen significantly in recent years. This Terner Center research brief looks at a key cost contributor: local impact fees charged to new residential developments to cover the costs new homes will have on municipal facilities and infrastructure. Researchers use LIHTC application data for 2020–2023 to examine the costs of these fees.
Key findings include:
- Of the 691 new LIHTC construction projects, almost all of them included development impact fees, which on average, added almost $20,000 per unit to development costs. However, per-unit fees varied widely, and approximately 13,660 affordable housing units—on 134 projects—were assessed more than $30,000 per unit in fees.
- While on average, impact fees contributed to less than 5 percent of total development costs, over the four-year study period, affordable developments paid an average of approximately $300 million in fees each year.
- Fee waivers, reductions, and deferrals can make a significant difference to project feasibility, lowering costs and reducing the need for additional public funding. In this case, if the fees weren’t charged, the resulting savings could have financed the development of an estimated 1,250 affordable housing units each year, assuming a per-unit subsidy of $200,000.
The brief also outlines key actions the State can take to work with local governments to waive or reduce these fees to get much-need affordable housing built.
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