Low-impact development (LID) is an innovative stormwater management strategy that restores the predevelopment hydrology to prevent increased stormwater runoff from land development. Integrating LID into residential subdivisions and increasing population density by building more compact living spaces (e.g., apartment homes) can result in a more sustainable city by reducing stormwater runoff, saving infrastructural cost, increasing the number of affordable homes, and supporting public transportation. We develop an agent-based model (ABM) that describes the interactions between several decision-makers (i.e., local government, a developer, and homebuyers) and fiscal drivers (e.g., property taxes, impact fees). The model simulates the development of nine square miles of greenfield land. A more sustainable development (MSD) scenario introduces an impact fee that developers must pay if they choose not to use LID to build houses or apartment homes. Model simulations show homeowners selecting apartment homes 60% or 35% of the time after 30 years of development in MSD or business as usual (BAU) scenarios, respectively. The increased adoption of apartment homes results from the lower cost of using LID and improved quality of life for apartment homes relative to single-family homes. The MSD scenario generates more tax revenue and water savings than does BAU. A time-dependent global sensitivity analysis quantifies the importance of socioeconomic variables on the adoption rate of apartment homes. The top influential factors are the annual pay rates (or capital recovery factor) for single-family houses and apartment homes. The ABM can be used by city managers and policymakers for scenario exploration in accordance with local conditions to evaluate the effectiveness of impact fees and other policies in promoting LID and compact growth.