Starting October 2026, Maryland counties must wait until a project is complete before collecting development impact fees—a significant cash-flow shift for residential builders.
Most construction and trades owners don't realize that Maryland just changed when they'll have to pay development fees on residential projects. And the change is substantial enough to reshape project financing decisions.
Here's what happened: Maryland passed SB325, the Housing Certainty Act, which includes a provision that prohibits counties and municipalities from collecting development excise taxes or development impact fees on residential real estate projects—including mixed-use developments with residential units—until construction is complete and the project meets certificate-of-occupancy requirements.
What this means in practice: Instead of paying these fees upfront when you pull permits or break ground, you now defer them until the project generates revenue and occupancy certificates are issued. For projects with substantial development fees, this can mean deferring six figures or more in cash obligations from the project's early, capital-intensive phase to its completion phase.
Development impact fees vary widely by jurisdiction but typically cover the cost of public infrastructure—roads, water systems, schools, parks—needed to support new development. They're standard practice in Maryland's growth corridors. Counties like Montgomery, Prince George's, and Howard have long collected these fees early in the development process. That's changing.
Who this affects: Any builder or contractor working on residential projects in Maryland jurisdictions that impose development impact fees or excise taxes. If your county doesn't currently charge these fees, this won't affect you. But if you're working in areas with established fee structures, this is a material change to project cash flow and financing.
The timeline: The provision takes effect October 1, 2026. This gives jurisdictions and developers time to adjust financing models and fee schedules. Projects permitted before that date may operate under the old rules, depending on how individual counties interpret the transition. It's worth confirming with your local permitting office how they plan to apply this.
Why it matters for your decisions: If you're financing a residential project, the timing of when fees are due affects your construction loan structure, your cash-flow projections, and your relationship with lenders. Deferring six or seven figures in fees until project completion can ease early-stage financing but may affect how lenders view the project's total cost and risk. You'll want to model both scenarios—what your current project costs with upfront fees, and what they'll cost under the new rule.
The provision is found in Section 20-128(C)(1) of SB325, pages 9-10. It applies statewide, though its impact varies by jurisdiction based on existing fee structures.
If you're planning residential work in Maryland, it's worth a conversation with your lender and your local permitting office about how this change affects your specific project timeline and financing.
Source: Maryland SB325, Land Use - Permitting - Development Rights (Housing Certainty Act), Section 20-128(C)(1).