Impact fees and the financial structure of development

There is increasing pressure to shift the financial burden of the provision of off‐site infrastructure and services from government to building producers and consumers. Some measures to achieve this end have already been introduced on a piecemeal basis. Examines the financial implications of impact fees for development. The amount of the fee levied on a particular development is determined by the fee system. Its effects on the economics of property development are determined by the financial structure of the development. There is no necessary equivalence between impact fees and the ability of schemes to bear them. The same dichotomy exists, by extension, in the property market as a whole. Any fee system based on actual infrastructure impact will produce charges whose pattern differs from that of market strength. Weak markets would be faced with much greater adjustment problems than strong markets. As a result, impact fees threaten to disrupt existing property market structures. Developers should be aware of the fundamental change in their operational environment which would ensue.