Understanding the Difference Between an HOA and CDD

It is not unusual for homes situated in amenity-rich master-planned communities and housing developments to have an HOA and/or a CDD. The fees associated with an HOA and a CDD make life easier for homeowners living in a community by ensuring amenities are well maintained. A commonly asked question by homebuyers is, “What is the difference between an HOA and CDD?”

What is an HOA?

An HOA, or Homeowners Association is the governing body of the development, complex or community in which you purchase a home. HOA’s are private entities that are comprised of homeowners within the neighborhood and assist with the upkeep and enforcement of the community regulations. When you purchase a new home within an HOA, it’s common for membership to be mandatory which means that paying HOA fees are a requirement as well. Typically, HOA fees are paid separately and are not included in your mortgage. An HOA fee is paid monthly, quarterly, or annually to help maintain the community.

HOA fees are used for handling the overall appearance and daily management of the community.

HOA fees will cover:

  • Certain Maintenance and repairs to common areas
  • Common area insurance
  • Certain Landscaping costs
  • Administrative Management

HOA’s assist communities in putting their best foot forward by enforcing certain standards that all residents must abide by. Aesthetically, HOA’s make the neighborhood a place for all to enjoy while also maintaining or increasing property values.

What is a CDD?

With Florida being the third most populous state in the United States, many local Tampa developers have searched for new ways to fund development projects. The need for more infrastructure and new large-scale developments to support Florida’s rate of growth has led many developers to forego traditional methods of financing for their new home construction projects and instead use Community Development Districts, CDDs.

CDDs are a type of government entity with a main purpose to plan, finance, construct and operate community-wide infrastructure and amenities for residents to enjoy. CDDs follow Florida’s Sunshine Laws and meetings are held in an official public setting. If the community you are interested in has luxury amenities and community sponsored events, you can expect a CDD.

With a CDD, the developer takes out a bond so it can create and pay for the infrastructure and amenities in a community. That bond is then paid back by the residents of the community who are enjoying all the amenities the neighborhood has to offer. Homeowners living in a CDD community are assessed through their annual property tax bill in the form of a non-ad valorem assessment. A portion of the CDD fee is the actual repayment of Municipal Bonds (generally paid off between 25-30 years), while the other part of the fee goes towards operation and management fees, and county taxes. While the municipal bond fees can dissipate, operation and management fees and county taxes will still be required to pay.

CDD fees will cover:

  • Infrastructure such as roads, sidewalks, street lights
  • Community Amenities (pools, parks, gym, clubhouse, etc.)
  • Sewer and Water
  • General Maintenance

Homeowners living in a CDD community can count on consistent high levels of public facilities and services that are funded through CDD fees.

In communities that have both HOA and CDD fees, the HOA is accountable for enforcing the deed restrictions and overall neighborhood conditions while the CDD handles the general maintenance and will pay off the communities’ amenities and infrastructure. The CDD nicely complements the responsibilities of the Homeowners Association.