The Stakes in 2025

For U.S. homebuilders and their land development partners, 2025 is turning out to be a year of tight margins and tighter nerves.

Mortgage rates hovering around 7% for 30-year fixed loans, paired with historically high new-home asking prices, are squeezing affordability and slowing buyer traffic. Builders are resorting to heavy incentives—rate buydowns, price concessions, and closing-cost credits—to keep deals moving, while cutting lot takedowns and postponing projects that no longer pencil.

The fact is, projects live or die on their ability to reduce upfront fees, optimize financing, and secure flexible agreements with municipalities. The best operators aren’t waiting for the market to improve—they’re reshaping the economics of development now. By using advanced tools like competitive property tax analysis and fee audits, developers can unlock new profit opportunities while giving builders the lot cost relief they need to stay competitive.

But behind the front-line challenge of selling homes lies a bigger pressure point: land and development costs. Escalating municipal impact fees, unpredictable special district charges, and rising infrastructure costs are adding tens of thousands of dollars per home before a builder even breaks ground. In some markets, the problem isn’t the lack of demand but the cost of entitlement and development, costs that can silently undermine the economics of a project.

In this environment, early-stage financial due diligence is no longer optional. It’s a competitive “must-do” competency.

Every battle is won before it is fought,” says Carter Froelich, Managing Principal at Launch Development Finance Advisors. “Do your homework, plan for contingencies, and support your requests with facts, not opinions.”

A CFO’s Risk Zone

The entitlement process is often where projects go sideways. Cities, school districts, and special-purpose agencies increasingly look to “new growth” to cover gaps in infrastructure budgets. Developers who lack a detailed understanding of the fee structure and tax landscape often overpay—or get blindsided by unexpected charges at the permit window.

Launch DFA’s suite of tools—the DIFscovery Process™, Builder Fee Reports™, and Competitive Tax Rate Analysis™—was designed to root out these risks early. But this isn’t about one firm’s tools; it’s about a mindset shift. Developers and CFOs must think like forensic accountants long before they sign a land deal.

Our DIFscovery Process has led to an average 22% reduction in development impact fees we’ve reviewed,” Froelich says. “We audit the consultant studies that jurisdictions rely on, and we inevitably find errors—math, logic, reference mistakes—that, once corrected, can save millions.”

This is not an academic exercise. A single mistake in a city’s impact fee calculation can add $10,000 or more per lot, wiping out profit for both the developer and their builder customers. Froelich adds,

Someone has to be a fly on the wall protecting the private sector from overreach.”

When $20K Becomes $50K

One of the most immediate dangers lies in permit and fee estimates that look fine in a spreadsheet but explode when reality hits.

We’ve seen homebuilders walk into a permit window expecting $20,000 per door and find out it’s really $50,000,” Froelich notes. “That can crater a project overnight.”

Builder Fee Reports are designed to prevent this.

We go in and pull every requirement—impact fees, permits, conditions of approval—into one clear report,” Froelich explains. “It’s third-party verification of the real numbers. When you’re committing tens or hundreds of millions, you don’t want surprises.”

This approach has led to some tough calls.

There have been times when our analysis has made builders reevaluate whether they want to move forward with a land purchase,” he says. “If the numbers don’t work, better to know now than to lose money later.”

Competitive Tax Rates as Leverage

Beyond direct fees, property tax structures can be the difference between a viable project and a dead one—Froelich points to a striking example in Arizona.

Our project was in a school district with a nuclear power plant, so the assessed valuation was off the charts and the school tax rate was tiny,” he says. “Most developers were increasing their total community facilities district (CFD) property tax rate by $3. We were able to go to $10 because of that disparity—and it made our financing worth more than the land itself.”

This kind of Competitive Tax Rate Analysis™, Froelich says, is critical when structuring CFDs or other special taxing districts. By understanding how far a project’s effective property tax rate can go without impacting price and pace, developers can unlock additional bonding capacity and finance infrastructure more efficiently.

Cost Management in a Market of Incentives

The current market dynamic—where builders are spending heavily on buyer incentives—makes controlling lot costs even more vital.

Builders are pushing harder to reduce lot costs to offset incentives,” Froelich explains. “Developers, in turn, have to chisel down their own costs and expenses.”

Impact fee credits and special-purpose taxing districts are key levers.

When we set up a district and secure impact fee credits, that $30,000 to $35,000 per door in reimbursed infrastructure costs can either go to reducing the lot price or improving the developer’s margin,” Froelich says. “In a slow market, passing it through to the buyer makes sense. In a hot market, it goes to the bottom line.”

Spotting the Traps

Entitlement processes are littered with potential pitfalls, especially when agreements are vague.

One of the biggest issues we see is leaving things unsaid,” Froelich cautions. “Every promise, every cost-sharing agreement, every reimbursement mechanism needs to be spelled out in the development agreement or pre-annexation agreement. Otherwise, three years later, a new city manager can say, ‘We never agreed to that.’”

Launch’s approach involves mapping out every piece of infrastructure, identifying who benefits, and locking down the terms in writing.

Nothing means anything unless the terms are written down, and the agreement is signed,” Froelich says. “Our goal is to load-up the agreements with specific language so we can enforce the intent of the parties down the line.”

Proof Points from the Field

Recent case studies highlight the value of this proactive approach:

• A California Builder Fee Report identified $7.5 million in unexpected school and park fees that would have wiped out a project’s profit margin.
• An Arizona Competitive Tax Rate Analysis™ secured an additional $40 million in bonding capacity by leveraging a unique school district valuation.
• DIFscovery audits across multiple jurisdictions have reduced fees by an average of 22%, with some projects seeing savings of $15,000 to $20,000 per lot.

CFO Playbook for 2025

For CFOs of private equity-backed or cost-sensitive homebuilders, Froelich’s advice is simple but sharp:

1. Scrutinize every number.
   “When you run your land residual analysis, tick and tie every assumption to market data, recent bids, and verified fee schedules,” he says.
2. Plan for flexibility.
   “We set up agreements that create certainty for the jurisdiction but flexibility for us—to adjust densities, share costs, or bring in new reimbursement mechanisms,” he explains.
3. Understand timing.
   “Most entitlement failures are about timing—be conservative in relation to your revenue projections and special district bond issuances,” Froelich warns.

Take-away

In a market defined by uncertainty—volatile rates, high costs, and wary buyers—builders and developers cannot afford to leave money on the table or walk blind into fee traps. Early, detailed, and often uncomfortable financial analysis is the difference between a successful deal and a failed one.

What we do,” Froelich says, “is give our clients clarity and leverage. Whether that means saving millions or deciding to walk away, the goal is the same: make decisions with your eyes wide open.”