Affordable Housing Impact Fee on Single Unit Additions and Demolitions

On November 6, 2025, City Council approved Ordinance 8712, which put in place a citywide affordable housing impact fee on replacement homes and substantial additions to single unit homes. View the memo. The new fee will apply to all complete building permit applications submitted to the city on or after Jan. 31, 2026.

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Project Overview

The intent of the impact fee is to ensure that single unit developments that are exempted from the Inclusionary Housing (IH) regulations are contributing to affordable housing in the community.

The impact fee applies to two types of residential development:

  1. Demolition of a detached home and replacement with a larger detached home.
  2. Substantial additions to single-unit detached homes.

The impact fee on replacement homes applies as follows:

  • A flat rate of $11 per square foot of newly added floor area. As with other impact fees, a project receives a “credit” for existing home size.
  • Does not apply to homes under 2,000 square feet in total area.
  • The area of a new accessory dwelling unit (ADU) is exempt.

The impact fee on substantial additions applies as follows:

  • A flat rate of $11 per square foot of added floor area.
  • An addition to an existing dwelling unit of 500 square feet or less is exempt from paying the fee. This is offered as a one-time exemption rather than tracking a cumulative total of additions over time.
  • The area of a new accessory dwelling unit (ADU) is exempt.
  • Does not apply to homes under 2,000 square feet in total area, including the area of the proposed addition. 

Background

The City of Boulder is working to support community housing needs, including preserving and enhancing housing choices. As part of this initiative the city has initiated a project to explore how replacement homes and substantial additions to homes contribute to the need for affordable housing. The consultant Gruen Gruen + Associates recently completed a Nexus Study to examine the causal connections, or nexus, between single unit housing teardowns (or significant alterations/expansions) in Boulder and conditions within the local economy and housing market.

Single unit demolitions often remove a smaller, relatively affordable home and replace it with a large expensive home. Similarly, substantial additions effectively replace more affordable smaller homes with larger more expensive homes, reducing affordability. This type of development is not subject to the city’s existing Inclusionary Housing regulations because it is not considered “new” residential development. Thus, these projects are not currently required to contribute toward affordable housing in the community.

The findings by the consultant indicate that significant additions to single unit homes generate additional employment (jobs) and, thus, create the demand for additional affordable housing. Funds collected from the new impact fee will be earmarked for affordable housing and reserved in a separate account. Monies received into this fund would be restricted solely for the construction, purchase, and maintenance of affordable housing.