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Home Builders Association of Michigan

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Fair & Responsible Permit Fees

As Michigan communities work to address housing challenges, it's important to examine every factor contributing to the cost of new home construction, renovations or repairs, including permit fees. 

Permit fees provide important funding for building departments to ensure construction is safe and code-compliant, but Michigan law places limits on how those fees are established and how the revenue they generate may be used.

The HBA of Michigan created the Fair & Responsible Permit Fees guidebook to help communities take a proactive look at how their fees are established and determine whether they are fair, reasonable and consistent with Michigan law.

The guidebook provides a series of questions elected leaders and citizens should be asking, as well as legal parameters officials should understand when reviewing their fee structures.

permit fee win in eaton county

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Find Resources for Your Role

Select your role below for information, resources and next steps tailored to you.

elected officials

Is Your Community's Fee Structure Compliant?

Under Michigan's State Construction Code Act, permit fees must bear a reasonable relationship to the cost of providing permitting and inspection services, including appropriate overhead. These fees cannot be used to generate revenue for unrelated government operations. Recent court decisions have reinforced these requirements, making it important for local elected leaders to understand how their community establishes, collects and uses construction permit fees.

1. Fees must be reasonable

Local governments have authority to establish fees for services performed by the enforcing agency but that authority is not unlimited.

2. Fees must reflect costs

Permit fees should reflect the cost to the building department, including appropriate overhead.

3. revenue use is restricted

Revenue generated through fees may only be used for the operation of the enforcing agency, not for other municipal purposes.

Stille-DeRossett-Hale Single State Construction Code Act, MCL 125.1522 – Michigan law governing construction permit fees and their permitted uses

Questions Every Local Official Should Ask

  • When was our construction permit fee schedule last reviewed?
  • How are fees calculated, and what costs are included?
  • Do building department revenues consistently exceed the costs of providing services?
  • Are construction permit fee revenues being used exclusively for authorized purposes?
  • Can our administration demonstrate that fees have a reasonable relationship to the services provided?

additional resources

Michigan court rulings on establishing and expending building department permit fees

State Construction Code Act — MCL 125.1522

Michigan Department of Treasury Numbered Letter 2000-02 (Revised) – State guidance on accounting for building department revenues, expenditures and allowable overhead.

Michigan Association of Home Builders v City of Troy, 504 Mich 204; 934 NW2d 713 (2019)

take the next step

We encourage local elected officials to work with their building departments to review existing construction permit fee structures and ensure they comply with Michigan law. Ask how your community's fees are calculated, whether revenues are being used appropriately and when the fee schedule was last evaluated. A proactive review can help prevent unlawful fees and ensure that housing costs aren't being unnecessarily increased.

building officials

Are Your Building Department's Fees Supported by Actual Costs?

Building departments require adequate funding to provide essential services, but Michigan law requires construction permit fees to bear a reasonable relationship to the cost of providing them. A well-documented, cost-based fee structure helps protect your department, promote transparency and ensure that builders and property owners are charged appropriately.

Use the following considerations to evaluate your department's current practices and identify areas that may warrant further review.

Cost Calculations

Are permit fees reasonably related to the direct and indirect costs of providing plan reviews, inspections and other authorized services?

Documentation

Can your department demonstrate how fees were calculated, which costs were included and how shared expenses were allocated?

Revenue & Expenses

Are permit fee revenues and department expenditures properly accounted for, with any accumulated balances reviewed and explained?

Regular Reviews

Does your department periodically compare fee revenue with actual service costs and recommend adjustments when necessary?

Take a Closer Look at Your Fee Structure

Not sure where to start? HBAM's Building Department Fee Review Checklist provides practical questions and considerations for evaluating fee calculations, accounting practices, overhead expenses and compliance with Michigan law.

Building Department Permit Fee Checklist

Work Together to Review Your Fees

We encourage building officials to work with their municipal administrators, finance staff and elected leaders to review existing construction permit fee structures. Evaluate how fees are calculated, confirm that revenues are properly accounted for and ensure that your department can document the costs supporting its fee schedule.

builders

Under Michigan law, local governments must establish reasonable construction permit fees that bear a reasonable relationship to the cost of the services provided.

HBAM has successfully challenged unlawful permit fee practices in Michigan, including its precedent-setting case against the City of Troy. These legal victories reinforce important protections for builders and property owners throughout the state.

Concerned About Permit Fees in Your Community?

If you believe a municipality may be charging excessive construction permit fees, consider the following:

  • Review the municipality's published permit fee schedule
  • Compare fees across similar projects and neighboring communities, recognizing that legitimate service costs can vary
  • Document fees and relevant communications that raise concerns
  • Contact HBAM or your local HBA for assistance evaluating the situation

Help Us Identify Potentially Unlawful Fees

HBAM continues to work with builders across Michigan to identify and challenge improper construction-related fees. If you've encountered a fee structure that you believe may violate state law, we want to hear from you.

Report an Issue

homeowners

Why Permit Fees Matter to You

You don't have to be building a new home to be affected by construction permit fees.

When excessive fees increase the cost of building new homes, those costs can ripple throughout the housing market. Higher construction costs can contribute to higher home prices, limit the supply of new housing and increase competition for existing homes, making housing less affordable for everyone.

Permit fees can also directly affect homeowners undertaking renovations, additions or certain repairs.

Michigan law requires construction permit fees to be reasonably related to the cost of providing permitting and inspection services. These protections help ensure that homeowners and builders aren't paying more than necessary to support those services.

Find Your Elected Officials