Pros and Cons of CDD Fees for Your Next Home

Buying a home in a CDD, which stands for Community Development District, can be confusing particularly if you haven’t heard of this acronym or lived in a community with a CDD before. Although many people mistakenly believe that CDDs are similar to HOAs, they’re completely different.

In short, an HOA takes care of specific tasks, such as landscaping, maintenance of common areas, and trash pick-up, in exchange for a monthly or quarterly fee. A CDD collects fees from homeowners in order to build specific infrastructure elements, such as utility lines, roads, sidewalks, street lights, parks, pools, playgrounds, tennis courts, and other amenities that are designed to serve the residents who live in a community. Since a CDD supplements the services provided by an HOA, a neighborhood can have both a CDD and an HOA. Because CDDs are becoming more prevalent as new communities are being developed across Florida, let’s take a close look at the pros and cons of buying a home in one of those communities.

The Benefits of Buying a Home in a Community with CDD Fees

Although the thought of paying annual CDD fees, sometimes in addition to HOA fees, may not be appealing to a homeowner, there are a few undeniable advantages, including:

  • Better Amenities – Whether we like it or not, all the amenities that most of us enjoy when we live in a planned development come at a cost. Building roads, utility lines, pools, parks, playgrounds, clubhouses, tennis courts, golf courses, and other nice features within a community can be very expensive. Because most developers aren’t able to cover the cost of the initial infrastructure and neighborhood amenities that many homeowners expect nowadays, CDD fees offer a cost-effective way to finance all the elements that support the development of new communities. Another important advantage is that the CDD fee gives you access to a wide range of amenities year-round. Therefore, you don’t have to look for entertainment options outside the community and pay a separate fee to enjoy them. 
  • A Better Home Appreciation Rate – The communities with CDDs allocate an annual maintenance budget for common areas. What’s more, in the neighborhoods that also have an HOA, the CDD and HOA typically establish specific rules and regulations regarding home maintenance, improvements, additions, and landscaping, which are meant to maintain a consistent look and feel within the community. A well-maintained home located in a neighborhood with a cohesive look tends to appreciate better than a home in a community that doesn’t have any rules and regulations to control the neighborhood’s aesthetics. Additionally, the residents of a community with a CDD and an HOA can rest assured knowing their neighborhood is being well maintained all the time, including during their absence. 
  • Financing Assistance – If you’re looking for a new home in a community with a CDD, it’s essential to know that some developers may offer different incentives they obtain from lenders. For instance, some builders might offer to pay closing costs, buy discount points, or even cover part of the down payment. 

The Drawbacks of Buying a Home in a Community with CDD Fees

Although the benefits of purchasing a home in a planned development cannot be denied, there are also a series of drawbacks you should be aware of in order to make an informed decision. Here are the most important ones:

  • CDD Fees Aren’t Tax Deductible – Unlike HOA fees, which are paid separately, CDD fees are collected as part of annual property tax bills. Because these fees are included in the tax bill, many homeowners mistakenly believe they’re tax-deductible. However, CDD fees are non-ad Valorem assessments, which typically aren’t allowed as deductions, though exceptions may apply.
  • CDD Fees Could Increase Over Time – Even though CDD fees are part of property taxes, and Florida state law comprises Amendment 10, which limits the amount of increase in the yearly assessed value of properties, the local governments cannot limit the amount of CDD fees, which are established by CDD boards. While there is no law to limit the amount of CDD fees, it’s very rare for these fees to increase substantially from one year to another.  

Buying a home in a community with CDD fees can be intimidating and confusing. That’s because you’re not just buying a home; you’re buying a home in a community that has its own fees and rules. To choose the right home and neighborhood, make sure that you research the fees and amenities of each community you’re considering. But even before you start house hunting, contact North Florida Mortgage to learn about the financing options you could access in order to buy the perfect home in the perfect neighborhood for you!

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