Land development transforms raw acreage into buildable lots with roads, utilities, drainage, and grading. Whether you are planning a 10-lot residential subdivision or a 200-acre master-planned community, understanding total costs before you break ground is essential. The answer to how much money for land development depends on project scope, location, soil conditions, regulatory requirements, and the level of infrastructure you need to install.
On average, developers spend between $20,000 and $100,000 per acre to take raw land through the full development process, including site clearing, grading, road construction, utility installation, and permitting. Per-lot infrastructure costs typically range from $25,000 to $50,000 or more, depending on lot density and municipal requirements. Those numbers can climb significantly in high-cost states like California and New York, where impact fees alone sometimes exceed $100,000.
This guide breaks down every cost category, provides regional benchmarks, outlines realistic budgets for small and mid-size projects, and explains how developers finance these expenses. Use it as a planning tool before you commit capital to your next subdivision.
Planning a land development project? Clearhouse Lending specializes in horizontal construction loans that fund site work, infrastructure, and lot development. Schedule a free consultation to discuss your project timeline and financing options.
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How Much Does Land Development Cost Per Acre?
Land development costs per acre range from $20,000 to $100,000 nationally, with most projects in populated suburban markets falling between $30,000 and $65,000 per acre. The wide range reflects differences in topography, soil conditions, utility proximity, and local regulations.
Several factors determine where your project falls within that range. Flat, previously cleared land near existing municipal water and sewer lines costs far less to develop than hilly, wooded acreage that requires extensive grading, well drilling, and septic engineering. According to HomeGuide, the average development cost is roughly $3 per square foot of land area, which translates to about $130,000 per acre at the high end and $22,000 per acre at the low end for basic site preparation.
High-growth markets in Texas, Florida, and the Pacific Northwest are seeing development costs increase 8 to 12 percent above national averages due to population migration and supply-chain pressure on materials like concrete pipe and asphalt. Meanwhile, rural or exurban areas with lower lot densities often see lower per-acre totals but higher per-lot costs because infrastructure must serve fewer homes across greater distances.
Understanding per-acre costs gives you a starting point, but most developers find that a per-lot analysis is more useful for budgeting because it accounts for density. A 20-acre parcel platted for 40 quarter-acre lots will have very different economics than the same acreage platted for 80 lots at eight units per acre.
What Are the Major Cost Categories in Land Development?
Land development budgets break into three major categories: land acquisition, hard costs (site work and infrastructure), and soft costs (engineering, permits, and professional services). Hard costs typically represent 55 to 65 percent of the total budget, soft costs account for 15 to 25 percent, and the land itself usually represents 15 to 25 percent, depending on the market.
Hard costs include everything that involves physical work on the site: clearing and grubbing, mass grading, stormwater management, road construction, curbs and sidewalks, water lines, sanitary sewer, electric and gas extensions, and landscaping. Soft costs include civil engineering, surveying, geotechnical reports, environmental studies, legal fees, permitting, impact fees, and project management.
According to the National Association of Home Builders, the finished lot represented 13.7 percent of the average new home sales price in 2024, down from 17.8 percent in 2022. That declining share reflects rising construction costs outpacing lot costs in many markets, but it does not mean development has gotten cheaper. The average cost of constructing a new home in 2024 reached $428,215, the highest level NAHB has ever recorded.
A clear budget breakdown helps you allocate contingency reserves properly, negotiate with subcontractors, and present a credible project proforma to lenders. If you are applying for a horizontal construction loan, your lender will expect a detailed line-item budget backed by contractor bids and engineering estimates.
How Much Does Infrastructure Cost Per Lot in a Subdivision?
Infrastructure costs per lot in a typical residential subdivision range from $25,000 to $50,000 or more. For larger lots or projects in areas without nearby municipal services, per-lot infrastructure can exceed $75,000. These costs cover roads, water, sewer, stormwater, electric, gas, and telecom connections.
Road construction is often the single largest line item in a subdivision budget. Building a two-lane residential street with curb, gutter, and sidewalk typically costs $150 to $250 per linear foot. A 40-lot subdivision with 2,000 linear feet of road could spend $300,000 to $500,000 on roads alone, or $7,500 to $12,500 per lot just for street infrastructure.
Water and sewer installation is the next major expense. According to Angi, connecting vacant land to municipal water and sewer costs between $9,000 and $34,500 per connection, depending on distance from existing mains. Where municipal sewer is unavailable, developers may need to install package treatment plants or community septic systems at costs ranging from $200,000 to over $1 million for the entire project.
Stormwater management has become increasingly expensive as municipalities tighten environmental regulations. Detention ponds, bioswales, and underground retention systems can add $3,000 to $8,000 per lot depending on soil permeability and local stormwater ordinances. Many jurisdictions now require post-development runoff to match or fall below pre-development levels, which often requires more extensive engineering.
Use our commercial mortgage calculator to model how per-lot infrastructure costs affect your total project financing needs.
What Are Soft Costs in Land Development?
Soft costs in land development typically represent 15 to 25 percent of the total project budget. These include civil engineering, surveying, geotechnical studies, environmental assessments, architectural design, legal fees, permitting, impact fees, insurance, and project management. On a $2 million development project, soft costs could total $300,000 to $500,000.
Civil engineering and land surveying are usually the first soft costs a developer incurs. Preliminary engineering studies, topographic surveys, boundary surveys, and wetlands delineation can cost $20,000 to $60,000 before you even submit a subdivision application. Full construction documents for roads, grading, utilities, and stormwater typically run $50,000 to $150,000 depending on project complexity, according to Transect.
Impact fees are the wild card in soft cost budgets. These fees, charged by municipalities to fund schools, parks, fire stations, and transportation improvements, vary wildly by jurisdiction. Some suburban counties charge $2,000 to $5,000 per lot, while high-growth communities in California, Colorado, and Florida may charge $20,000 to $50,000 per lot. In extreme cases, California impact fees have exceeded $100,000 per unit, according to Building Advisor.
Looking to finance your subdivision's soft costs and infrastructure? Clearhouse Lending's horizontal construction loans can cover engineering, permitting, and site work. Many of our loan programs fund up to 80 percent of development costs. Contact our team to get pre-qualified.
How Do Development Costs Vary by Region?
Development costs vary dramatically by region, with the most expensive markets costing three to five times more than the least expensive. The primary drivers of regional cost differences are labor rates, material prices, impact fees, regulatory complexity, and land values themselves.
In the Southeast and parts of the Midwest, developers can often bring lots to market for $25,000 to $40,000 per lot in total development costs (excluding land acquisition). Markets like suburban Atlanta, Nashville fringe areas, and central Texas offer relatively low impact fees, straightforward permitting, and competitive contractor pricing.
By contrast, development in coastal California, the Northeast corridor, and parts of the Pacific Northwest regularly exceeds $60,000 to $100,000 per lot in development costs alone. Higher labor costs, stricter environmental regulations, lengthy entitlement timelines, and aggressive impact fee schedules all contribute. A subdivision in the Bay Area might spend two years and $500,000 just on entitlements before a single shovel hits the ground.
Florida presents an interesting middle ground. Strong population growth has created robust demand for new lots, and permitting timelines are generally faster than in California or the Northeast. However, stormwater management costs are higher than average due to flat terrain, high water tables, and strict environmental protections. Developers in Florida should expect to budget $5,000 to $10,000 per lot specifically for stormwater infrastructure.
For a deeper look at how to structure financing around regional cost differences, read our guide on how land development loans work.
What Is the Minimum Budget for a Small Subdivision Project?
A small subdivision project of 10 to 20 lots on relatively flat, previously cleared land with nearby municipal utilities typically requires a minimum budget of $500,000 to $1.5 million for land acquisition and development combined. Bare-minimum development costs (excluding land) for a simple 10-lot project start around $250,000 to $400,000 in low-cost markets.
Here is a sample budget for a 10-lot subdivision on 5 acres in a moderate-cost suburban market:
This sample totals approximately $685,000 in development costs, or about $68,500 per lot. Adding land acquisition at $150,000 to $300,000 for the 5-acre parcel brings the total project budget to $835,000 to $985,000. If finished lots sell for $80,000 to $120,000 each, the developer's gross revenue would be $800,000 to $1.2 million, leaving a margin that must also cover financing costs and contingency.
Smaller projects face a disadvantage on per-lot economics because fixed costs like engineering, surveying, and permitting get spread across fewer lots. A 10-lot project might spend $60,000 on engineering while a 50-lot project spends $120,000, but the per-lot engineering cost drops from $6,000 to $2,400. Scale matters in land development.
Learn more about structuring debt for projects like this in our guide on how to finance subdivision development.
How Do Developers Finance Land Development Costs?
Most developers finance land development through a combination of equity (typically 20 to 35 percent of total costs) and debt (65 to 80 percent) using specialized land development loans. According to the NAHB AD&C Financing Survey, the effective interest rate on land development loans declined from 11.77 percent to 10.92 percent in the third quarter of 2025, though credit conditions have been tightening for fifteen consecutive quarters.
Land development loans are structured differently from standard commercial mortgages. They are typically short-term (12 to 36 months), interest-only during the development period, and funded through a draw schedule tied to construction milestones. Lenders release funds as the developer completes grading, road base, utility installation, and final paving, with each draw verified by a third-party inspector.
Common financing sources for land development include:
- Community and regional banks - The most common source, offering 12 to 24 month terms with rates currently in the 9 to 12 percent range
- Private and hard money lenders - Faster closings and less documentation, but rates from 11 to 15 percent with higher origination fees
- Credit unions - Some credit unions lend on smaller subdivision projects, often with competitive rates but lower loan amounts
- SBA 504 loans - Available for owner-occupied commercial developments through the Small Business Administration
- Seller financing - Some landowners will carry back a portion of the purchase price, reducing the cash equity needed at closing
Clearhouse Lending offers bridge loans and horizontal construction loans designed specifically for land development and subdivision projects. Our programs fund up to 80 percent of total development costs with interest-only payments during the construction period.
Use our commercial bridge loan calculator to estimate monthly carrying costs on your development loan.
What Contingency Should Developers Budget for Unexpected Costs?
Experienced developers budget a contingency reserve of 10 to 20 percent of total hard costs to cover unexpected expenses during land development. First-time developers or projects with significant unknowns (poor soils, environmental concerns, untested municipal processes) should lean toward the higher end of that range.
The most common sources of cost overruns in land development include:
- Unforeseen soil conditions - Rock, expansive clay, or high water tables can increase grading and foundation costs by 20 to 50 percent
- Utility conflicts - Existing underground utilities in unexpected locations may require rerouting at costs of $10,000 to $100,000
- Environmental remediation - Previously unknown contamination or protected species can delay projects by months and add six-figure costs
- Regulatory changes - New stormwater ordinances, updated building codes, or zoning amendments enacted during development can require plan revisions
- Material price escalation - Concrete, asphalt, PVC pipe, and lumber prices can fluctuate 10 to 25 percent over a 12 to 18 month development cycle
Most lenders require a minimum 10 percent contingency line item in the project budget before they will fund a land development loan. Some lenders hold back a portion of loan proceeds as a contingency reserve that can only be drawn with documented change orders. Building a realistic contingency into your budget from day one signals to lenders that you understand the risks and have planned for them.
For a comprehensive overview of the development financing process from land acquisition through vertical construction, read our ground-up development financing guide.
Frequently Asked Questions
How much does it cost to develop one acre of raw land?
Developing one acre of raw land costs between $20,000 and $100,000 on average, depending on location, topography, and the level of infrastructure required. Basic site clearing and grading on flat land may cost as little as $5,000 to $15,000 per acre, but adding roads, water, sewer, and stormwater systems pushes costs significantly higher. Urban and suburban areas with strict regulations typically fall at the upper end of the range.
What percentage of a development budget goes to soft costs?
Soft costs, which include engineering, surveying, permitting, legal fees, impact fees, and insurance, typically represent 15 to 25 percent of the total land development budget. In jurisdictions with high impact fees or lengthy entitlement processes, soft costs can exceed 30 percent. Developers should get detailed estimates for local permit and impact fee schedules early in the planning process to avoid budget surprises.
How long does land development take from start to finish?
A typical residential subdivision takes 12 to 24 months from the start of engineering and permitting through final lot delivery. Simple projects in developer-friendly jurisdictions can be completed in as few as 8 to 10 months, while complex projects requiring environmental remediation, rezoning, or lengthy public hearings may take 3 to 5 years. Permitting and entitlement timelines are often the biggest source of delay.
Can you get a loan to cover land development costs?
Yes, land development loans are specifically designed to fund site work, infrastructure, and lot improvements. These loans typically cover 65 to 80 percent of total development costs, with the developer contributing 20 to 35 percent as equity. Interest rates on land development loans currently range from 9 to 13 percent, with terms of 12 to 36 months. Contact Clearhouse Lending to discuss financing options for your project.
What is the difference between land development and vertical construction?
Land development (also called horizontal construction) covers all the site work needed to create buildable lots, including grading, roads, utilities, drainage, and landscaping. Vertical construction refers to building the actual structures on those lots, such as houses, apartments, or commercial buildings. Many developers complete horizontal development first, then sell finished lots to builders, while others handle both phases. Learn more about how these phases differ in our guide to horizontal vs. vertical construction loans.
What are the biggest hidden costs in land development?
The most commonly overlooked costs include utility relocation ($10,000 to $100,000), environmental mitigation for wetlands or endangered species, off-site road improvements required by the municipality, and escalating material prices over long development timelines. Impact fees are another frequent surprise, as they can change between the time you budget a project and the time you pull permits. Always verify current fee schedules directly with the local planning department.