CDD vs HOA: What’s the Difference?

Neighborhoods whose homes are subject to CDD and HOA fees can be very desirable due to the lifestyle they offer, but they might not be a good fit for everyone. But what are CDDs and HOAs? We explain the difference, and how they affect home buyers.

Home buyers, especially first-time home buyers, have many things to consider. One important question for home buyers: Does the home you’re interested in require CDD or HOA fees? These fees can affect your monthly payment, and there might also be community restrictions to consider. So what’s the difference between CDD and HOA?

What Is a CDD?

A CDD (or Community Development District) is basically a type of government entity that provides infrastructure such as roads, utilities, and amenities to specific planned unit development (PUD).

Most planned communities have a CDD, which means they normally have desirable amenities, possibly activity staff and community sponsored events. We have several wonderful planned CDD communities in Northeast Florida, including Fleming Island Plantation, Nocatee, Eagle Landing, and Julington Creek Plantation.

A CDD allows the developer to finance the costs with a CDD bond through tax-free municipal bonds. This is basically a loan. That “loan” is repaid by the homeowners in the community, with each property charged an annual amount. The CDD shows as an assessment on the homeowners’ tax bill each year and is collected by the county tax collector. If you have a mortgage, this is amortized into your payment.

Usually a portion of the CDD collected is the actual bond repayment, and the balance is the continued Operations and Maintenance (O&M) of the community. The bond portion has an end date similar to a mortgage. Make sure to inquire when the bond will be paid off, because that will leave you with only the O&M portion to pay.

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What Is a HOA?

Each HOA (or Homeowners Association) can vary a bit based on the community or subdivision, but an HOA fee is basically a predetermined set fee that each homeowner in the community pays monthly, quarterly, or annually to help maintain the community. In an HOA, a homeowner is also subject to certain Covenants, Conditions, and Restrictions (CC&Rs), which outline what a homeowner may or may not do with the property.

  • If the home you’re looking at is in a community that has both CDD and HOA: The Homeowners Association deals with things like the overall condition of the neighborhoods and ensures the covenants and restrictions are adhered to regarding the appearance of the homes in the community.
  • If your subdivision has only an HOA: In this case, the HOA is there to make sure assets like the pool, playgrounds, and common areas are well maintained, in addition to making sure the CC&Rs are upheld by the residents.

In an HOA community, fines may be issued to homeowners who don’t abide by the CC&Rs, and some communities may even place liens against homes for broken rules and unpaid fines. Make sure to review the Sellers Property Disclosure to find out if the home you’re interested in has this particular fee

Keep in mind that homeowners pay CDD and/or Homeowners Association fees in addition to whatever mortgage payment they may have, so it’s important to factor them in (i.e., to find out exactly how what they are and how much they cost) when calculating “how much house” you can afford. Despite the extra expense, these types of neighborhoods can be very desirable due to the lifestyle they offer, but they might not be a good fit for everyone. Make sure to ask questions about CDD and HOA fees up front before making a buying decision.

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