HOA vs CDD: What are your fees paying for?

Depending on where you live on the First Coast you may have to pay HOA fees, CDD fees, maybe both or (if you are lucky) neither. The question is not only what they are, but what are you paying for?

Home Owner’s Association (HOA):

You are probably familiar with an HOA, but for the sake of discussion lets go into a bit of detail. An HOA is an association that enforces the rules of a planned community or condominium. When you move into a neighborhood or condo that has an HOA you are required to join, pay the fees and abide by the rules of the association. The fees pay for community maintenance of the grounds, amenities and the enforcement of the rules. The more amenities and more attractive the grounds are, the higher your fee will be in general. Also called a Property Owner’s Association (POA), the rules are generally created by the community’s developer when building and developing the neighborhood or condo for the purposes of marketing, managing and selling lots. The HOA board, after a certain amount of lots are purchased and occupied, is made up of residents. Which would make it possible for you to sit on the board if you can get elected. The rules are outlined in the association’s covenants and restrictions documents. You should read and review the documents to determine whether having an HOA is a positive or negative for you. For more information about pros and cons of having an HOA click Here!

Community Development District (CDD):

In planned communities, the cost of infrastructure has been shifted from the municipality, as a whole, to only the residents who live in the newly built communities. Especially here in Northeast Florida, many of the new communities are being built in formerly undeveloped locations. It is expensive to install new sewer, road and education infrastructure. Not to mention nature trails, pools and splash parks. The CDD fee is handled much like a tax and is often paid, like property tax, through the escrow account. They are due once per year and can last between 15 and 30 years. At the end of the bonds life the fee is reduced to a much lower amount. As many people do not live in their homes for as long as they used to, the terms have gotten longer to keep the annual payments lower and more marketable.

In short, a CDD fee pays for the creation of new communities and amenities. The HOA fee pays for the maintenance and management of those communities and amenities. HOA fees generally do not go away. CDD fees do go away, or are reduced, after a certain period of time.  Both will reduce your purchasing power, your lender can tell you how much of an effect it will have. The higher the fee is, the less income you will have available for mortgage payments.