I was recently talking with a client who is in the process of building a new home on Long Beach Island when the topic of affordable housing development fees came up. It was something that caught both of us by surprise, particularly how much these fees could add to the overall cost of construction.
After doing some research, I found that all LBI municipalities adopted or updated their affordable housing development fee ordinances in 2026. Depending on where you're building, these fees can add thousands of dollars to a project.
With the amount of new construction taking place across LBI, I thought this was worth sharing.
What Is an Affordable Housing Development Fee?
New Jersey allows qualifying municipalities to collect development fees on certain residential and commercial construction projects to help fund affordable housing initiatives.
The money collected goes into municipal affordable housing trust funds and is used for eligible affordable housing programs, including housing development, rehabilitation, and other approved initiatives.
Unlike property taxes, these are generally one-time fees associated with new construction or redevelopment.
How Much Are These Fees on LBI?
One thing I found interesting is that these fees aren't necessarily the same across Long Beach Island's six municipalities.
New Jersey generally allows municipalities to charge residential development fees of up to 1.5%, but municipalities can establish lower rates.
Based on the municipal ordinances reviewed, here's how the residential development fees compare:
Barnegat Light: 1%
Harvey Cedars: No development fee provision identified
Surf City: 1%
Ship Bottom: 1%
Long Beach Township: 1%
Beach Haven: 1.5%
Beach Haven stands out as the only municipality with a confirmed residential rate of 1.5%, while the other four municipalities with identified rates charge 1%.
I wasn't able to identify a residential affordable housing development fee provision for Harvey Cedars, so that municipality's requirements would need to be confirmed directly with the Borough.
While the difference between 1% and 1.5% might not sound substantial, it can add up quickly when dealing with LBI property values.
How Are These Fees Calculated?
One important thing to understand is that the fee isn't necessarily based on what you paid for the property or how much you spend building the home.
Instead, it's generally calculated using something called equalized assessed value.
In simple terms, this is a property's municipal tax assessment adjusted to account for the difference between assessed values and estimated market values.
For example, if a property has a tax assessment of $800,000 and the municipality's assessment-to-market-value ratio is 80%, its equalized assessed value would be $1 million.
If the entire $1 million were subject to the development fee, a 1% rate would result in a $10,000 charge, while a 1.5% rate would result in $15,000.
The actual value used for the calculation is determined through the municipal assessment process.
What If You're Tearing Down an Existing Home?
This is where these fees become particularly relevant to the LBI real estate market.
We see older homes purchased, demolished, and replaced with new construction all the time.
For qualifying demolition-and-replacement projects, the development fee is generally calculated on the increase in equalized assessed value attributable to the improvements, rather than the entire value of the completed property.
Let's say an older home has an equalized assessed structure value of $400,000. After demolition and construction of a new home, the structure's equalized assessed value increases to $1.6 million.
That's a $1.2 million increase.
At a 1% development fee, the charge would be approximately $12,000.
At Beach Haven's 1.5% rate, that same increase would result in an $18,000 fee.
That's a $6,000 difference based on the municipality's rate alone.
These are hypothetical numbers, and actual fees would need to be calculated by the municipal tax assessor.
Does Every Construction Project Have to Pay?
Not necessarily.
There are exemptions depending on the municipality, the type of construction, and when the project received its approvals.
For example, certain affordable housing developments may be exempt (rare on LBI), along with qualifying owner-occupied homes demolished and replaced following a fire, flood, or natural disaster.
Some municipalities also have exemptions for projects that received approvals before a specific date.
Ship Bottom's 2026 ordinance, for example, includes an exemption for certain developments that received qualifying approvals before March 15, 2026, provided substantial changes aren't made.
These exemptions vary, so it's important to check with the municipality before assuming a fee applies.
What Does This Mean for LBI Real Estate?
For anyone building a new home on Long Beach Island, this is yet another expense that should be factored into the overall budget. Thanks New Jersey.
Whether you're purchasing a vacant lot, tearing down an older home, or building on property you already own, understanding the potential development fee can help you better estimate the total cost of the project.
Between the cost of purchasing the property, demolition, construction, permits, and other municipal requirements, expenses can add up quickly.
For builders, these fees become part of the overall development cost and may ultimately be reflected in the pricing of newly constructed homes.
It's also worth mentioning that these fees aren't necessarily new statewide. However, several LBI municipalities adopted or updated their ordinances in early summer/late spring 2026, making this particularly relevant for anyone considering a construction project.
The Bottom Line
This wasn't something I had given much thought to until it came up in a conversation with a client who is currently building a home, but after looking into it, I think it's something more LBI property owners and prospective buyers should be aware of.
Depending on the municipality and the value of the improvements, affordable housing development fees can represent a significant additional expense.
If you're considering purchasing a property to build on, tearing down an existing home, or making substantial improvements, it's worth checking with the municipality's construction office and tax assessor beforehand.
Understanding the full cost of a project before moving forward can help avoid unexpected expenses down the road.
