Building affordable housing in California has never been simple, but in recent years, the costs have climbed so significantly that even well‑designed, well‑financed projects are struggling to move forward. A new research brief from the Terner Center for Housing Innovation takes a close look at one major contributor to those rising costs: local impact fees.

Impact fees are charged by cities and counties to offset the increased demand new homes place on local infrastructure and they include everything from road improvements to parks, utilities, and public safety facilities. While these fees are intended to ensure communities can keep pace with growth, they have become a substantial cost burden on affordable housing developments.

The Terner Center’s analysis, based on LIHTC application data from 2020 through 2023, offers one of the clearest snapshots yet of how these fees impact project feasibility and the numbers are striking. Out of 691 new construction LIHTC projects, almost every single one included local development impact fees. On average, these fees added nearly $20,000 per unit to total development costs.

But averages only tell part of the story. Fee levels vary dramatically across jurisdictions, and in 134 projects, representing approximately 13,660 affordable homes, developers were charged more than $30,000 per unit in fees alone. For projects already navigating high construction costs, interest rate pressures, and limited subsidy availability, these fee levels are not just a line item, they’re a potential deal‑breaker. Across the full development budget, impact fees accounted for less than 5 percent of total costs but because affordable housing developments are so capital‑intensive, that small percentage translates to a big number. According to the brief, affordable housing projects paid about $300 million per year in impact fees during the study period. For a sector where every dollar matters, that is funding that could have been used to build new homes, preserve existing units, or provide deeper affordability.

The brief points to several opportunities for State leadership in reducing unnecessary cost burdens such as:

• Working with local governments to standardize and rationalize fee structures
• Encouraging or incentivizing fee waivers or reductions for 100% affordable developments
• Increasing transparency and predictability to help developers plan more effectively
• Supporting jurisdictions in replacing fee revenues when appropriate, so housing approvals don’t compete with municipal service needs

These are pragmatic steps that can meaningfully reduce project costs without compromising local infrastructure. Research like the Terner Center’s gives us the data to back up what our members feel every day: impact fees, while well‑intentioned, can jeopardize the very housing goals our state is working to achieve.

As policymakers debate how to increase production and accelerate timelines, cost drivers like impact fees must be part of the conversation. CCAH will continue engaging with State leaders, local officials, and the broader housing community to advance policies that make development faster, more predictable, and more cost‑effective. We’ll keep you updated as this work progresses—but for now, I encourage you to take a look at the full Terner Center brief. It’s a valuable contribution to a conversation California urgently needs to have.