Real Estate Agent · Houston, TX · Member since 2026 · 47 posts · 7 votes
Townhome and infill builders: if you're putting more units on a Houston lot, get the city's water and wastewater impact fees into your numbers before you make the offer.
1) Since July 1, 2026 the City of Houston charges $1,830.24 per service unit for wastewater and $2,553.11 per service unit for water, plus an admin fee. That's $4,383.35 per service unit combined.
2) The trigger is the Wastewater Capacity Reservation letter. The Permitting Center requires one for new development, adding to an existing development, or increasing occupancy. A teardown that becomes three townhomes is adding units.
3) How many service units your plan counts as comes from the city's Service Unit Equivalent table (UA005). Pull it for your exact product instead of guessing.
4) Timing matters on carry: paid water capacity is good for 2 years to begin construction, and paid wastewater capacity holds until it's used.
5) Wholesalers: a builder's max lot price drops by these fees for every service unit the plan adds. If your ARV math assumes three units, take the fees out of the spread before you price the contract.
Builders, what are you paying all-in per unit for permits and fees on infill right now? Drop the areas and lot size you're buying below.
Thank you for laying this out so clearly, Charos — this is exactly the kind of line item that quietly eats a deal when it isn't in the numbers before the offer. Even outside Houston, I see the same lesson: city fees and capacity charges have to be underwritten like any other cost, not discovered after you're under contract. Your point about the Capacity Reservation letter matters — the trigger isn't just new construction, it's any added unit, so a teardown-to-three-townhomes plan changes the math completely. I also like the reminder to pull the city's Service Unit Equivalent table for the exact product instead of guessing, and to factor the two-year window on paid water capacity into the timeline. For wholesalers, netting those fees out of the lot price before pricing the contract is the disciplined move. A great checklist for any infill buyer to run past their local permitting office.
Charos, the headline $4,383.35 is not the cost. Ametria is right that it belongs pre-offer, but the mechanical proof is displacement. No senior lender advances on impact fees, so they are 100% equity-funded. At 65% LTC and a 1.25x DSCR floor, every $1 of equity supports roughly $2.86 of total project cost. A three-unit teardown at 3.0 service units, about $13,150, does not cost $13,150 of lot basis. It costs about $37,600 of supportable basis. That is your actual bid reduction.
Second, the two-year water window is a carry trap. Horizontal infrastructure on infill runs $18,000 to $25,000 per pad for water, sewer, paving and drainage, and the S-curve has you 60% spent before the first slab. Pay capacity at permit and sit 12 months, and you carry $4,383 per unit at a 9.5% construction rate, about $416 per unit of dead interest, on top of LTARV spread compression. Underwrite the fee at the draw date, not at closing.
Third, pull UA005 for the exact product. A 1,600 SF townhome and a 2,400 SF unit do not carry the same service unit count, and guessing that line is how a 1.25x DSCR case becomes 1.14x at stabilization. The fee is fixed. Your unit mix is the variable you control.
Charos, what SUE count is the city actually assigning per townhome on your three-unit deals, and does lot basis still clear 1.25x DSCR after the $37,600 displacement?
@Charos great reminder, this one catches people every time. Worth adding for anyone looking north of the city: once you're outside Houston city limits in Conroe, Spring or The Woodlands area, water and sewer usually come from a MUD or the City of Conroe, and each one sets its own tap and capacity fees. I'd call the utility district and ask what adding units would cost, and whether they have the capacity, before pricing the lot. It really does vary neighborhood to neighborhood up here.
1) Max: I don't have a city-assigned SUE count per townhome that I can quote, and I won't guess it. The UA005 table for the exact product is the answer, and Impact Fee Administration will confirm it before you close on the lot. On for-sale townhomes the lender sizes on LTC and margin, not DSCR, but your core point stands: the fee is cash, so it comes straight off the lot bid.
2) A line most people miss: the city's impact fee exemption covers a new single-family home up to 3,000 sq ft and one service unit, if it sells under the Maximum Exempt Unit Cost. That cap is $330,985 effective Nov 1, 2026. Above it, budget the full fee.
3) Lauren: agreed. Outside the city, each MUD or the City of Conroe sets its own tap and capacity fees, so call the district before you price the lot.
Builders: are any of your infill homes landing under $330,985? Drop the areas and lot size you're buying below.
Lauren Cutchen 513 Reviews