Why are Development Impact Fees so high?

On most Development Impact Fee nexus studies I complete, the same question comes up before the study goes to council for adoption: "Why are the fees so high?"

It is a reasonable question. And it points to a distinction worth making explicit, because it shapes how cities should think about the work we deliver: "Our responsibility is to calculate the maximum amount the law allows. The city's responsibility is to determine the appropriate amount to actually adopt."

Under California's Mitigation Fee Act, every Development Impact Fee must be grounded in a nexus study — and that study serves a specific legal purpose. Someone has to establish the ceiling. Every calculation in the study, every cost estimate, every allocation of demand across land use categories, exists to define that number: the highest fee a jurisdiction could legally impose and successfully defend if challenged. Without a rigorously established ceiling, a city has no legally protected basis for charging any fee at all.

That number is a ceiling, not a directive.

Once the ceiling is established, the policy decision belongs entirely to the city. What fee makes sense for this community, at this moment, given its economic development goals, its housing priorities, and its competitive position relative to neighboring jurisdictions? Those are questions no consultant can answer on a city's behalf. A jurisdiction may choose to adopt the maximum, phase in increases over time, set fees below the ceiling to encourage a particular type of development, or differentiate rates by area or land use for local policy reasons. All of those choices are available — but only because the nexus study has first defined the boundary within which they can be made defensibly.

Consider the analogy of a property appraisal. The appraiser's role is to determine full market value accurately and defensibly. What the owner ultimately decides to do with that number — whether to ask for full value, accept less to facilitate a transaction, or structure the deal differently — is a separate judgment entirely. The appraisal defines the range of defensible options. The owner makes the policy call.

The nexus study works the same way. When the fees look high after we deliver a study, that is generally a sign the methodology is sound and the analysis is complete. The conversation that follows — about what level actually makes sense for that city — is precisely the deliberation a council should be having before adoption.

That conversation is not a problem with the study. It is the study doing its job.