The Rising Cost of Building a New Home in Denver

Rough framing and demolition of a home in Denver by Sustainable Design Build.

When considering building a new home in Denver, most people expect the largest expenses to come from land, labor, and materials. Yet, a fourth factor — development fees charged by local governments — has become a significant cost driver, pushing prices higher for new home construction. A recent study by the Home Builders Association of Metro Denver found that these fees account for more than 10% of the total cost of a single-family home (Svaldi, 2025).

What Development Fees Include

Development fees cover plan review and permit approvals, use taxes on construction materials, impact fees for infrastructure such as roads and parks, and water tap fees for connecting homes to essential services. On average, builders in metro Denver pay nearly $68,000 in fees for a detached home and more than $52,000 for a duplex, condo, or townhome (Svaldi, 2025).

The water tap fee is the single largest component, averaging $40,731 per single-family home. Costs vary widely — Erie and Thornton exceed $57,000, while Denver averages just $15,590. This discrepancy stems from differences in water rights and infrastructure, with newer communities paying substantially more to deliver water and sewer services.

Why It Matters for New Home Construction

For those planning custom home construction in Denver, development fees directly affect the overall project budget. Higher fees can reduce flexibility in design choices, materials, or finishes. They also impact long-term housing affordability, as the Home Builders Association estimates that every $1,000 increase in home cost prevents nearly 1,000 households in metro Denver from entering the market (Svaldi, 2025).

Communities like Castle Rock, where fees exceed $94,000 per detached home, defend these charges as a way to fund infrastructure such as roads, fire stations, and parks. However, the result is often a shift toward more expensive housing, limiting options for middle-income families and adding to the complexity of new builds.

Developer Fees in Denver: Lower Than Expected

One surprising finding from the Home Builders Association study is that developer fees in Denver are actually lower than in many surrounding suburbs and municipalities. While Denver is often viewed as a more expensive place to live and build, its average development fees — about $47,134 for a detached home and $33,009 for condos and townhomes — fall below those charged in Castle Rock, Erie, Brighton, Parker, Thornton, and Longmont (Svaldi, 2025).

This runs counter to the general consensus that urban cores are always more expensive. In fact, Denver’s long-standing connection to Denver Water has kept water tap fees significantly lower than newer suburban systems, which had to secure costly water rights later. As a result, a custom home in Denver may carry lower upfront government-related expenses than a similar project on the city’s outskirts.

For homeowners considering new home construction in Denver, this insight underscores the value of working with a builder who understands the nuances of local fee structures. Choosing to build within city limits can sometimes deliver unexpected cost advantages, even while offering the benefits of urban living, shorter commutes, and established infrastructure.

Building Smarter in Denver

For individuals exploring new home construction, understanding these fees is critical in choosing where and how to build. Location matters, not only for lifestyle but also for cost efficiency. Areas like unincorporated Adams County and Jefferson County impose significantly lower fees, which can make projects more attainable.

At Sustainable Design Build, transparency and expertise guide every step of the process. By helping clients navigate the realities of permitting, zoning, and local fee structures, SDB ensures that projects are planned strategically from the beginning. For those balancing cost and vision, SDB also offers alternatives such as whole home remodels or home additions in Denver, which can achieve similar goals without the added expenses tied to new land development.

Looking Ahead

As Denver continues to grow, regional cooperation and smarter planning will be key to keeping housing accessible. For those considering new construction, working with an experienced Denver custom home builder provides the advantage of foresight and local expertise. By addressing development fees upfront and aligning them with design priorities, homeowners can still achieve their dream home in a competitive and cost-sensitive market.

References

Svaldi, A. (2025, September 15). Study shows how development fees add to cost of Denver housing. The Denver Post. Retrieved from https://www.denverpost.com