The $20,000 Tax on Every Affordable Unit You Never See

The $20,000 Tax on Every Affordable Unit You Never See

Impact fees are the most expensive thing in your pro forma that nobody outside the industry has heard of. The Terner Center just sized them: across 691 newly built affordable (LIHTC) projects in California from 2020–2023, impact fees averaged about $20,000 per unit. On a 100-unit building, that's $2 million before you've poured a single footing.

Zoom out and it's roughly $300 million a year — about $1.2 billion over four years — charged to the affordable projects least able to absorb it.

Averages hide the real damage

Here's the nuance that matters. On average, impact fees are under 5% of total development cost — sounds survivable. But they're wildly uneven: 134 projects, covering about 13,660 units, got hit with more than $30,000 per unit. Fees don't kill the healthy deal; they kill the marginal one — the project that pencils at $18k a door and dies at $34k. And marginal deals are exactly the ones we need to get built.

> $20,000 per unit. The average California affordable-housing impact fee — a $2M line on a 100-unit deal.

What Sacramento is doing about it

A cluster of 2026 bills is chipping at the problem from different angles. SB 1117 would bar cities from charging impact fees on the first 750 square feet of an ADU — killing the current penalty where a slightly-too-big granny flat triggers full fees. SB 1014 comes at it through transparency: cities would have to disclose every infrastructure requirement within 30 days of an application and couldn't spring new demands later. Neither abolishes fees. Both make them legible and, at the edges, smaller.

The honest read

You can't make impact fees disappear — they fund real infrastructure, and cities lean on them precisely because the state keeps limiting their other revenue. But you can stop letting them ambush a deal. Pull the fee schedule before you tie up the site, not after. Model the high end, because your parcel might be one of the 134. And watch SB 1014: in this business, knowing the number early is often worth more than the number being lower.

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