System development charges are city and utility fees charged for new development and, in some cases, additions or changes to existing buildings. Often referred to as SDCs, these fees help fund public infrastructure such as water, sewer, transportation, parks, and stormwater systems.
For homeowners, SDCs can become an important part of the overall project budget when building a new house, adding an ADU, or creating additional dwelling units. While this post focuses primarily on residential projects, system development charges can apply to commercial development as well.
Because every jurisdiction calculates SDCs differently, the rules — and costs — can vary significantly from one project to another. Understanding these fees early in the design process can help homeowners avoid surprises later during permitting.
Why do cities charge SDCs?
As cities grow and new development occurs, public infrastructure systems must grow along with them. System development charges help fund improvements to the shared systems that support homes, businesses, and neighborhoods.
The idea behind SDCs is that new development creates additional demand on public infrastructure. Rather than placing the full cost on existing residents, cities and utility providers charge fees associated with new growth and development activity.
What types of system development charges are there?
The exact categories vary by jurisdiction, but residential projects commonly encounter several different types of SDCs:
- Water SDCs
These fees help fund the public water system that delivers water to homes and buildings. - Sewer SDCs
Sewer fees help support the infrastructure that carries and treats wastewater. - Transportation SDCs
These charges contribute to streets, sidewalks, intersections, and other transportation improvements needed as cities grow. - Parks SDCs
Some jurisdictions collect fees that help fund parks, trails, and recreational facilities. - Stormwater SDCs
These fees help support drainage and stormwater systems that manage runoff from developed properties.
Depending on the location, these fees may come from the city itself, utility providers, or special service districts.
What kinds of projects can trigger SDCs?
Jurisdictions calculate SDCs differently, but they most commonly apply to projects that increase the intensity of development on a property.
Residential projects that may trigger SDCs include:
- new houses,
- ADUs,
- projects that create additional dwelling units within an existing structure,
- and, in some jurisdictions, projects that significantly increase plumbing fixture counts or utility demand.
Commercial development can trigger SDCs as well, particularly for new buildings or projects that significantly increase occupancy or demand on public infrastructure.
Do additions and remodels trigger system development charges?
Not necessarily.
In many jurisdictions, typical residential remodels and additions trigger few or no SDCs. However, the rules vary significantly depending on the city, utility provider, and type of project.
In Portland, for example, standard home additions often do not trigger SDCs unless the project creates an additional dwelling unit or significantly increases utility demand.
Projects that convert existing space into a separate living unit — such as a basement apartment, detached ADU, or garage conversion with a kitchen and independent living facilities — are more likely to trigger additional fees.
What happens if you replace an existing house with a new one?
Many jurisdictions give some level of credit for existing development on a property.
For example, if a homeowner removes one existing house and builds one new house in its place, many jurisdictions will credit the property for the previous dwelling unit when calculating SDCs. However, if the project increases the number of dwelling units on the site — such as replacing one house with two — additional SDCs may apply.
The exact rules and credits vary by jurisdiction, and timing can matter as well. If too much time passes between demolition and redevelopment, some jurisdictions may no longer recognize the previous use when calculating fees.
Are ADUs treated differently?
Sometimes.
Because many cities are trying to encourage additional housing, they sometimes calculate or waive SDCs for ADUs differently than for new houses.
In Portland, for example, the city has waived certain SDCs for ADUs in recent years as part of an effort to promote housing development. Other jurisdictions may reduce fees, calculate them differently, or charge the same SDCs that would apply to a new dwelling unit.
As with most permitting and development-related fees, the rules can change over time and vary significantly from one jurisdiction to another.
When are system development charges paid?
Homeowners typically pay SDCs during the permitting process as part of the fees required to obtain building permits and utility approvals.
These charges are generally paid to the jurisdiction or utility provider rather than to the contractor performing the work. Depending on the project and location, SDCs can become a significant part of the overall non-construction costs associated with development.
How do I figure out whether SDCs apply to my project?
Because SDCs are separate from construction costs, they can sometimes catch homeowners by surprise during permitting. Depending on the project and jurisdiction, these fees may range from relatively minor to a significant additional project expense.
Unfortunately, there is no simple universal answer. SDC calculations vary significantly between jurisdictions, and the fees that apply to one project may not apply to another — even for similar types of work.
During the early design process, an architect can help identify potential SDCs and research the requirements associated with a particular property and jurisdiction. While jurisdictions often confirm exact fees later during permitting, understanding the potential impact early can help homeowners develop a more complete and realistic project budget.