March 2, 2026
By Gregory T. Smith and Caitlyn R. Culbertson
As the fifth installment of our ongoing series analyzing the legislative components of Governor Pritzker’s proposed housing agenda, the Building Up Illinois Developments (“BUILD”) initiative, this alert focuses on the proposed changes to municipal impact fees included in House Bill 5626, introduced in the Illinois House by Representative Kam Buckner on February 19, 2026. Identical language related to impact fees is also included in the companion Illinois Senate Bill 4062, introduced by Senator Cristina Castro on February 19, 2026.
If approved as presented, this legislation will require local governments that want to collect impact mitigation fees for residential development to adopt uniform state-mandated impact fee formulas for schools, park districts, transportation, public safety, as well as stormwater and other public facilities. The bill would eliminate the “patchwork quilt” of residential impact fees imposed by municipalities and counties across the state, replacing it with a singular procedure and set of standards, at the expense of local decision-making about how such fees are best structured and implemented.
Importantly, the legislation would preempt home rule authority over impact fees, preventing any municipality from adopting or imposing fees inconsistent with the proposed statewide standards and procedures. This preemption represents a significant shift in power to address financial impacts of new developments on local taxing bodies.1 Municipalities would still be allowed to implement lower impact fees than the formula-derived levels imposed by the State, but would be prohibited from exceeding the formula-based maximums. Further, the proposed legislation only restricts existing municipal authority to levy impact fees – it does not confer any new authority to impose impact fees upon non-home rule municipalities.
Background and Current State of the Law Regarding Impact Fees
Municipal authority to impose fees to mitigate the financial impact of new residential development on various governmental services is found in the Illinois Constitution, for home rule units, and in state law, for both home rule and non-home rule units. Home rule units have broad authority to impose impact fees. Krughoff v. City of Naperville, 41 Ill.App.3d 334, 354 (2d Dist. 1976), aff’d, 68 Ill.2d 352 (1977).
Statutory authority for transportation impact fees is the Road Improvement Impact Fee Law, 605 ILCS 5/5-901, et seq., which grants authority to home rule municipalities and counties with populations greater than 400,000 to impose transportation impact fees on new residential developments. Similarly, for school impact fees, Section 11-12-5 of the Illinois Municipal Code, 65 ILCS 5/11-12-5, grants authority to municipalities to require donations of land or fees for school grounds. In the case of annexations, municipalities may impose impact fees contractually through an annexation agreement. 65 ILCS 5/11-15.1-2(d). Other portions of the Illinois Municipal Code touch on other types of dedications and related fees including for parks, playgrounds, and public infrastructure. See e.g. 65 ILCS 5/11-12-5(1); 11-12-61, and 11-12-12.
Regardless of the constitutional or statutory basis for imposing the fee, impact fees must be “specifically and uniquely attributable to the development” to pass constitutional muster. Northern Illinois Home Builders Ass’n v. County of DuPage, 165 Ill.2d 25 (1995).
BUILD’s Mandatory Statewide Formula
Under the new legislation, municipalities authorized to levy impact fees would be required to calculate their fees using a uniform statewide formula devised by the Department of Commerce and Economic Opportunity (“DCEO”), which would be used to measure impacts on schools, parks and open space, transportation, public safety, and stormwater and other public facilities.
The DCEO would be required to issue, update annually, and make publicly available the data and formulae used to calculate standardized impact fees. This information will include multipliers estimating service demand by housing type; statewide per-capita or per-unit capital cost estimates for schools, parks, transportation, public safety, and stormwater facilities; and statewide adjustment factors permitting controlled variation.
Municipalities would, in turn, be required to use the DCEO-issued model worksheet or digital calculator to generate their local impact fee schedules. No alternative calculation method could be utilized. Further, middle housing would receive impact fee adjustments based on state-established multipliers reflecting the lower average household size and lower per-unit service demand those units would be expected to generate.
The bill also fully exempts certain types of developments from impact fees, including units affordable to households with income of 60% or less than the area median income, permanent supportive housing, transitional housing, and accessory dwelling units (ADUs)2. Municipalities would also be authorized to grant reductions for middle housing; transit-oriented development; redevelopment of vacant, underutilized, or brownfield parcels; and any building undergoing a change of use from a nonnon-residential a residential use.
Adopting Ordinance, Public Fee Schedule, and Reporting Requirements
To facilitate the rollout of uniform impact fee procedures, the DCEO would be tasked with preparing and distributing a model impact fee ordinance. Municipalities would be required to repeal their existing impact fee ordinances and adopt the language of the state-mandated ordinance verbatim or only with technical deviations to fit within their local codes.
Additionally, the bill requires that each municipality authorized to levy impact fees must, before imposing any fee, publish a schedule identifying:
1) The formula-generated maximum fee per unit type;
2) The State-issued multipliers and assumptions used;
3) Any allowable municipal adjustment factors applied; and
4) Any municipal reductions adopted.
Finally, the legislation would require each municipality imposing impact fees to annually report to the DCEO the amount of impact fees collected, fund expenditures, fund balances, number and type of housing units approved, and any use of adjustment factors. The DCEO will then publish these reports online.
Impact on Land Dedication Requirements
Under the proposed legislation, any land dedication requirement without a cash alternative is superseded. A pre-existing land dedication requirement may continue only if (1) it existed prior to the effective date of the legislation, and (2) a formula-based cash alternative using the State worksheets is available.
Implementation and Transition
The bill requires that the DCEO publish initial formulas, multipliers, worksheets, and the required model ordinance no later than 18 months after the effective date of the legislation. A municipality wishing to impose impact fees must then adopt the model ordinance and fee schedule no later than 12 months after the DCEO publishes the initial formulas and model ordinance. Until a municipality is required to adopt the model ordinance, it may continue to impose impact fees under its existing ordinances. Further, an application for residential development that is completed before the municipality adopts the model ordinance will be subject to the impact fee requirements in effect at the time the application was deemed complete.
Beginning 30 months after the effective date of the legislation, any impact fee imposed on residential development must be calculated in accordance with the state law.
As the legislative session progresses, this proposed legislation is anticipated to evolve through ongoing review and negotiation. We will continue to monitor developments and keep our clients apprised of changes to the bill and the potential impact on local development controls. In the meantime, please contact Gregory T. Smith, Caitlyn R. Culbertson, or any other Elrod Friedman attorney for additional guidance on impact fees or other components of the BUILD initiative.
1 The language in the current draft of the legislation states in the impact fees section that “[a] home rule unit may not regulate plan reviews or building inspections in a manner inconsistent with this Division.” 65 ILCS 5/11-12.2-65 (emphasis added). The reference here to “plan reviews or building inspections” appears to be an oversight that will presumably be corrected as the bill moves through the legislature.
2 For more information on the BUILD Initiative’s efforts to promote ADUs, see our recent alert: Building Blocks of the BUILD Agenda; Part 1: A New Framework for Accessory Dwelling Units | Elrod Friedman LLP