Development Impact Fees Go Before the U.S. Supreme Court

Development impact fees are just one of many factors contributing to high housing costs in California. But they’re a critical tool used by local governments to offset infrastructure costs. And they’re particularly important in California, given the unique constraints on localities’ ability to raise revenue.  

Under California law, these fees must be reasonable and related to the external costs of the project. If an impact fee is unrelated to the infrastructure costs caused by that development, or if the fee is exceedingly high, it can be declared a special tax, requiring approval from two-thirds of voters.

A case pending before the U.S. Supreme Court could make it harder for cities and counties to exact these fees. The plaintiff is a Placerville resident represented by the Pacific Legal Foundation. He sued El Dorado County after it charged a $24,320 fee for a manufactured home that he installed on vacant land in 2016.

Depending on how the case goes, local governments across the country could be required to conduct thorough, property-specific fee analyses before charging impact fees in the future.

El Dorado County’s attorney says that kind of burden “would disrupt if not destroy their ability to fund capital intensive infrastructure necessary to serve new development, bringing such development to a grinding halt.” The California Building Industry Association counters that a ruling against the plaintiff would lead to “unconstrained exactions on new development” and exacerbate the state’s housing crisis.

Oral arguments began last week. Read more about the case’s first day in court and its potential implications at CalMatters.