The Stacking Tax: The Hidden Force Behind Housing Prices

A Cost Few People See, but Everyone Pays

Housing affordability debates often focus on interest rates, zoning constraints, or the rising cost of construction materials. These factors matter, but they do not tell the full story. Another powerful force is shaping housing prices in California—one that rarely appears in headlines and almost never shows up in listings.

It lives inside the entitlement process.

Before a project is approved, before financing is secured, and long before a foundation is poured, development in California accumulates a layered system of fees, exactions, and mitigation requirements. These costs stack as a project moves through approvals, quietly shaping whether housing gets built, how much it costs, and what land is ultimately worth. This accumulation is commonly referred to as the stacking tax.

What Is the Stacking Tax?

The stacking tax is not the result of a single policy decision or one fee imposed at a single moment in time. It is the product of decades of public objectives layered onto the development process. Cities and counties have sought to fund parks and open space, improve transportation infrastructure, support school systems, protect environmental resources, expand affordable housing, and finance public facilities and services.

Each objective is reasonable on its own. Together, they create a significant financial barrier that must be cleared before housing can proceed.

In Santa Clara County and other high-demand regions, the combined burden of fees and mitigation can reach six figures per housing unit before financing costs, construction risk, or market uncertainty are even considered. These costs are embedded early and compound over time, making the stacking tax one of the most influential—and least visible—drivers of housing economics.

Why the Stacking Tax Reshapes Land Value

Housing is priced backward. Builders do not begin with what land “should” be worth and work forward. Instead, they begin with projected revenue from finished homes and work backward, subtracting construction costs, soft costs such as architecture and engineering, financing expenses, required profit margins, and the full stack of fees and mitigation obligations.

What remains after those deductions is the residual value of the land.

As stacking taxes rise, residual land value must fall, or the project becomes infeasible. This is why land that appears highly desirable on paper may attract conservative offers and why fully entitled land commands a premium over raw land. Entitlements reduce uncertainty, but they also lock in known costs that buyers must absorb.

The Supply-Side Consequences

When stacking taxes push projects beyond feasibility, the impact extends far beyond individual transactions. Housing production slows as projects stall or are abandoned. Entitled sites sit idle, and fewer units reach the market.

As supply tightens, upward pressure on housing prices persists—even in the absence of new fee increases. In this way, requirements intended to improve communities can unintentionally contribute to higher housing costs by limiting the volume of new housing delivered.

Why This Matters Now

Across California, municipalities continue to update fee programs, revise impact studies, and expand mitigation requirements in response to fiscal needs and policy goals. These changes often occur incrementally, making their cumulative effect difficult to track.

Yet stacking taxes have become one of the most important—and least transparent—forces shaping housing outcomes today.

Understanding them is critical for buyers evaluating new construction pricing, for sellers pricing development land realistically, for investors assessing feasibility and risk, and for policymakers examining the unintended consequences of layered requirements.

The Bigger Picture

Housing prices are not built solely with lumber and labor. They are built with approvals, conditions, and the accumulated cost of permission.

That cost starts—and stacks—at the permit counter.