Are community fees hurting sales? Most planned communities in Florida have CDD fees, Home Owner Association fees, or both. While the value of homes in Tampa has decreased 25-50%, neighborhood CDD fees have not decreased. A $200 per month CDD fee may have been acceptable when a home was valued at $400,000, but it might become an objection if the same home is now worth $300,000. The combination of property taxes, CDD fees, and HOA fees can put monthly payments out of reach for some home buyers. On the flip side, most CDD neighborhoods have newer homes, more amenities, stronger enforcement of deed restrictions and tighter security. Some communities even include phone, high speed internet, cable TV and alarm monitoring services.
What is a CDD?
There are over 600 Community Development Districts (CDDs) in Florida, including 116 in the Tampa Bay area. Florida law allows for the establishment of Community Development Districts to fund infrastructure needs and neighborhood amenities. A CDD has the authority to issue tax exempt bonds at favorable rates and spend the proceeds on developing and improving a neighborhood. CDD funds pay for building utilities, roads, water, waste/sewer, schools, conservation areas, streetlights, and bridges. Additionally, many communities build amenities such as parks, club houses, swimming pools, tennis courts, trails, golf courses, security gates, etc. CDD bonds are repaid through an annual property tax assessment divided amongst the residents of a community, usually over a 20 year period. As homes are built, residents eventually take control of the CDD governing board. CDD fees allowed developers and builders to defray upfront expenses and offer homes at lower costs, at least initially.
How Much Are the Fees?
Most planned communities in the Tampa Bay area have CDD fees and HOA fees. The amount that a Tampa Bay homeowner pays toward the CDD usually depends upon the lot size, and the fees very by community. For example, a 90 foot wide lot might have an obligation of $150-$300 per month, while a 50 foot wide lot might pay $80-$100 per month.
What is the problem?
While Tampa Bay home values have declined by 30%-50%, the CDD fees remain fixed. Consider a home that was worth $500,000 at the peak of the market. In Tampa’s hardest hit Tampa neighborhoods, the same home may be valued at $270,000 today. If a potential home buyer puts down 10%, the principle and interest payment would be $1304. Since the home is located within Tampa city limits, last year’s property taxes were at estimated at $5656. While we expect taxes to decline next year based upon the drop in property values, a buyer must qualify at the current tax amount of $471 per month. The CDD fee on this home is a rather high $3837 per year ($320 per month). Since the fees are paid as part of taxes, a home buyer would need to be able to qualify for the extra $320 per month added to the payment. The county property tax plus the CDD would be $791 per month, while the mortgage principle would be $1304, for a total of $2095. If Home Owner’s Insurance is $200 per month, a borrower would need to be able to qualify for a monthly payment of $2295. A consumer with an average debt load would need to have an income in the $80,000-$100,000 range to qualify.
What can be done?
The long term solution might be to re-finance the CDD bonds for additional years at lower rates, but the bond market is experiencing turbulent times. For the near term, if an individual home owner wants to make their home more marketable, they should consider paying off their portion of the CDD bond. A one-time payment of $10,000-$15,000 might make the home the only one in a neighborhood without a CDD bond fee, and would make it more attractive to buyers. For a homebuyer, call Team Bohannon today for strategies to maximize your choice and purchasing power.