A provision in Maryland's new housing law pushes back when developers must pay impact fees—potentially freeing up significant cash during construction.
Most construction and trades owners don't realize that Maryland just changed when they'll have to pay impact fees on residential projects. Under a provision buried in SB325 (the Maryland Housing Certainty Act), counties and municipalities can no longer collect development impact fees or excise taxes on residential real estate—or mixed-use projects with residential units—until the project receives its certificate of occupancy.
Impact fees are charges that local governments impose on new development to offset the cost of infrastructure like roads, water systems, schools, and emergency services. For residential projects, these fees can run tens of thousands to hundreds of thousands of dollars depending on project size and location.
Currently, most Maryland jurisdictions require developers to pay these fees upfront or before construction begins. SB325 changes that timeline. Starting October 1, 2026, impact fees cannot be collected until the project is substantially complete and meets certificate-of-occupancy requirements—meaning the building is finished, inspected, and approved for occupancy.
This deferral applies to any residential project or mixed-use development that includes residential units. It covers impact fees and excise taxes imposed by counties and municipalities under their local land-use and development regulations.
Developers, general contractors, and trades working on residential projects across Maryland will see a direct impact on project cash flow. Subcontractors and material suppliers may also notice changes in how developers manage payment schedules, since developers will no longer need to reserve or secure impact-fee money early in construction.
This is particularly significant in fast-growing Maryland counties where impact fees are substantial. Deferring these payments can free up working capital during the construction phase—when cash flow is typically tightest.
The provision is codified in Maryland Code, Land Use § 20-128(C)(1), found on pages 9–10 of SB325. The effective date is October 1, 2026, giving jurisdictions and the development community time to adjust billing and payment procedures.
The law does not eliminate impact fees; it simply defers collection. Developers will still owe them—just at project completion rather than upfront. Jurisdictions will need to update their permitting and fee-collection processes to reflect this change.
If you're bidding or planning residential projects in Maryland, factor in the October 1, 2026 effective date. Confirm with your local jurisdiction how this will affect your project timeline and financing. Some municipalities may issue guidance on how they'll handle fees already collected under the old rules, or how they'll manage the transition.
This change is part of Maryland's broader effort to reduce barriers to residential development and improve housing supply. For trades and construction businesses, it represents a meaningful shift in project economics—one worth understanding before the law takes effect.
Source: Maryland SB325, Land Use - Permitting - Development Rights (Maryland Housing Certainty Act), § 20-128(C)(1).