Once you close on a home in Florida, you are potentially responsible for several financial obligations, and one of the most misunderstood terms in Florida real estate is the Community Development District (CDD). If you’ve noticed mentions of “CDD fees” throughout your home search, you’re not by yourself. For planned communities in Florida, these fees can have a substantial impact on the housing market. But what is a CDD, and what implications does it pose for homeowners?
| Feature | Description |
|---|---|
| A special-purpose government entity created to manage and finance infrastructure and community-wide improvements in new developments. | |
| Funds infrastructure such as roads, sewer lines, parks, and recreational facilities. | |
| Typically range from $120 to $2000+ annually, included in property tax bills. | |
| Fees usually last for 15 to 30 years. | |
| Comprises Bond/Debt (fixed, for infrastructure) and Operations & Maintenance (variable, for ongoing upkeep). | |
| CDDs handle infrastructure and community-wide amenities, while HOAs manage deed restrictions and private amenities. | |
| Increases property tax bills due to the inclusion of CDD fees. | |
| Enhances quality of life by providing well-maintained common areas and recreational facilities. |
What is a Community Development District (CDD)?
Understanding CDD Basics
What is a Community Development District (CDD)? A CDD is a special-purpose government entity created by an act of the Florida Statutes. It was designed to fund, operate and maintain infrastructure in large, orchestrated communities. In short, a CDD allows developers to pay for neighborhoods with modern amenities without depending on local government to pay for the required infrastructure.
CDDs are popular in Florida because they allow communities to have well-maintained parks, roads, water systems, recreational facilities and other amenities without saddling municipal budgets. Developers can finance these improvements upfront by using CDDs. For homeowners, this translates into improved infrastructure and services.
Legal Framework
The legal basis for CDDs is the 1980 Uniform Community Development District Act. Under this law, developers can create a CDD that functions as a separate entity of government. If formed, the CDD can issue tax-exempt bonds that pay for infrastructure developments.
Types of Infrastructure Addressed by CDDs
CDDs fund and maintain numerous community infrastructure, such as:
- Roads and streetlights
- Water and sewer systems
- Stormwater management
- Park, playground and recreational facilities
- Community amenities, including clubhouses and pools
These projects are financed with CDD fees, which the homeowners in the community pay. To better understand their role in Florida real estate, let’s take a closer look at how CDDs work.
History of CDDs in Florida
Historical Context
The idea for CDDs in Florida originated when the state passed the Uniform Community Development District Act of 1980. It is falling short of the rapidly increasing demand for planned communities and services that modern infrastructure can provide in Florida’s booming real estate market.
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More Growth During the Housing Boom
They became especially popular in the housing boom of the early 2000s (2003–2008). The instruments were finance mechanisms used by developers to fund large-scale community projects, allowing them to construct neighborhoods with high-quality amenities. These communities drew buyers seeking homes with modern conveniences and resort-style living.
D. Impact of 2008 Housing Market Collapse
The 2008 housing market crash created hurdles for some CDDs, however. So property owners within such CDDs were not able to make mortgage payments and a lot of CDDs were unable to pay back bonds that were issues secured by the property tax. Although a few districts struggled, the majority of CDDs have now emerged and are operating successfully.
How CDDs Work
Operational Overview
To appreciate the functionality of CDDs, it is best to explore their operational structure and financing mechanisms. Here’s a snapshot of the steps involved:
Issuance of Tax-Exempt Bonds
When a developer creates a CDD, they sell tax-exempt bonds to pay for building out the infrastructure and amenities. The bonds are paid off over time via CDD fees charged to homeowners in the community.
Transition of Control
The developer acts as the CDD’s initial manager. However, as more homes are sold and the community expands, control of the CDD shifts to the homeowners, who vote in a CDD board. The board manages the district and makes decisions about maintenance, improvements and budgeting.
Role of the CDD Board
The CDD board operates similarly to a local government, managing services and infrastructure upkeep within the community. The board keeps a watchful eye ensuring homeowners’ fees are spent efficiently to preserve the neighborhood’s standard of living.
What Does a CDD Fee Cover?
Components of CDD Fees
Homeowners living in a CDD community will have to pay CDD fees in addition to an annual property tax bill. These fees are comprised of two main parts:
Debt Service
This part of the fee is used to pay back the bonds issued to finance the community’s infrastructure. Debt service payments are usually for 20 to 30 years, at which point this part of the CDD fee may go down or go away.
Operations and Maintenance
The operations and maintenance segment covers the daily expenses for upkeep of the community’s infrastructure and amenities. This includes maintenance of landscaping, roadways, parks, pools and recreational amenities. This last portion of the fee is perpetual (in contrast to the debt service).
Amenities Covered
Examples of amenities commonly funded by CDD fees include:
- Clubhouses & health clubs
- Pools and water features
- Walking trails and bike paths
- Sports courts and playgrounds
Impact on Homeowners
Homeowner Considerations
For those looking to buy a home in a CDD community, it’s important to understand how these fees influence the total cost of homeownership. Here’s what you need to know:
Annual Fee Ranges
CDD fees differ greatly by community. In general, homeowners can pay anywhere from $500 to $2,500 per year, depending on the community’s infrastructure and amenities size and scope.
Impact on Property Taxes
CDD fees are usually found in your annual property tax bill. That means you’ll be paying them as part of your local property taxes. Although this may raise your total tax bill, it’s worth noting that these fees help pay for municipal services and amenities.
Long-Term Costs
Although payment of CDD fees may seem like an extra cost, it could end up saving homeowners money over time. Financing this type of infrastructure can save higher municipal taxes to fund CDD improvements.
CDD Fees vs. HOA Fees: What’s the Difference?
CDD vs. HOA Fees
Prospective homeowners often mistake CDD fees for HOA (Homeowners Association) fees. Both are prevalent in Florida communities, but they serve different functions:
| Feature | CDD Fees | HOA Fees |
| Purpose | Funds infrastructure and amenities | Covers community rules and shared services |
| Scope | Larger projects (roads, utilities, parks) | Smaller-scale services (lawn care, security) |
| Mandatory? | Yes, tied to property tax | Yes, based on HOA agreements |
There may be some overlap in the services provided, but CDD fees cover infrastructure, and HOA fees cover daily management of the community.
Conclusion
Overall, learning what CDD means in Florida real estate is essential for anyone interested in buying a home in the state. Capital Districts are integral to building well cared for and vibrant neighborhoods by funding and operation for infrastructure and amenities. CDD fees, although an added expense, ultimately benefit homeowners in the long run as CDD fees go towards high-quality amenities and well-kept neighborhoods.
If you are shopping for real estate in Florida, do your homework on CDDs in the communities you are looking at. Ask questions, double-check all costs and decide how much value you’d get from the services vs the fees. Armed with this information, you can make a more informed decision about your future home.
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