BIA calls on local governments to work with builders to lower fees, improve affordability
Fees builders must pay to local governments in order to build a new home in the Sacramento region now average $109,000 per home – and a new analysis shows that fees have hit the point where many proposed new home projects may not be built.
The study, conducted by Economic & Planning Systems (EPS) for the North State Building Industry Association, found that the fees charged for homes on standard-sized lots have risen by 25% since 2020.
Fees on homes on smaller lots – generally homes that can be profitably sold at lower prices – have risen by 15% since 2020 to an average of $90,000. These rising fees are an important factor in reduced housing affordability, said Tim Murphy, the BIA’s President & CEO.
“High fees mean that only higher-priced homes can be profitably built, which adds to the region’s growing housing affordability crisis,” Murphy said. “But the study shows that rising fee burdens have reached the point where some projects may not be feasible.
“Housing production in our region is already far below levels needed to meet the need for new housing. Rather than adding to the cost to build, our partners in local governments need to carefully evaluate their fees and keep them as low as possible.”
The study analyzed a comprehensive set of projects underway in Sacramento, Placer, El Dorado and Yolo counties. The EPS study found that fees totaling between 15% and 20% of a home’s sale price poses potential feasibility problems, while fees exceeding 20% may cause challenges. Fee ranges for six of the 16 higher density projects studied were at or above 20%, while two others were touching that level.
“Homebuilders recognize that they must pay their fair share for infrastructure needed to accommodate growth,” said Clifton Taylor, President of Taylor Builders and the BIA’s 2025 President. “But the fees many jurisdictions are charging have gotten to the point where many projects simply won’t pencil out.
“For our members to continue building the new homes the region needs, this study shows that jurisdictions need to be thoughtful and careful about how they set their fees, and that the total fee burden needs to be evaluated both in terms of absolute dollar amounts and as a percentage of the finished home value.”
Fees for new homes on standard-sized lots average $125,000 in El Dorado County jurisdictions (up 30% from five years ago); $114,000 in Yolo County communities (up 15%), $109,000 in Sacramento County jurisdictions (up 24%); and $95,000 in Placer County communities (up 17%).
Murphy noted that many local jurisdictions do work hard to keep their fees justified and affordable, and some have reduced fees when studies show their levels were excessive.
“Builders and local officials all recognize that the region is in the middle of a worsening housing crisis that can only be resolved by finding ways to reduce costs and speed the development process to bring the supply of housing more into line with the demand,” he said.
Jamie Gomes, Managing Director at EPS and the lead analyst on the report, said while impact fees are an important tool for local jurisdictions to help fund expanded infrastructure and utilities, the impacts of the fees need to be considered as well.
“Higher than average impact fee burdens are usually only sustainable in higher-income developments or communities, where home prices may be unattainable for many buyers,” he said. “High costs and fee burdens eliminate the ability to hit lower home prices that are attainable to broader household income ranges. That’s why fees should be carefully evaluated.”
EPS is a land economics consulting firm that provides municipalities, developers, and builders with realistic assessments of the feasibility of projects and works with local governments throughout the West in preparing development impact fee nexus studies and impact fee comparisons.
