People have many reasons for moving to Florida. My move to Florida was focused on spending more time with my boys and granddaughter. My priority for buying a house in Florida was being ten to 15 minutes from my granddaughter. I love being able to babysit and drive home in just six minutes!
In the Orlando area there are new communities going up everywhere. This creates lots of competition between new and existing homes. It also means production builders are adding lots of amenities to differentiate their communities from other builders. At times you might imagine the Disney magic extends to the communities around Orlando.
These community features aren't free though. They cost money to construct and maintain. That's the pitfall of buying a house in Florida. They're selling (and you're buying)more than a house. You're buying the excitement of a fairytale home and lifestyle that you might not need, appreciate or worse, a home you really can't afford.
Monthly Costs When Buying a House in Florida
Too often we focus on the down payment and closing costs when buying a house. There are lots of people around to help you through the closing. You're on your own after the closing so it's important to focus equally on your monthly homeowner costs that you'll be paying for many years.
Homeowners understand their mortgage payment and escrow which includes property taxes and homeowner insurance. You may also be responsible for flood insurance but beware that your lender isn't the final decision maker on this (read about my Flood Insurance Nightmare).
New homeowner expenses when buying a house in Florida include:
- Homeowner Association (HOA) fees for amenities.
- Homeowner Association fees for typical homeowner expenses like lawn care.
- Community Development District (CDD) fees that cover the cost of building and maintaining community infrastructure.
Which HOA Amenities Will You Use?
Every feature sounds wonderful in community sales literature. That's what good marketing is all about, providing the motivation for you to buy. But please, go over the list and honestly identify the things you'd use in your current life and maybe one or 2 other features you'd like to try.
Why is this important? My monthly HOA fees are $263/mo, reasonable as they cover expenses I'd pay for anyways, things like landscaping, exterior pest control and Internet services. Also included are a security gate (no guards), community pool, tennis courts, fitness center and cable, which I probably wouldn't pay for on my own.
- Gated entrance with/without security guards 7 x 24.
- One/multiple pools with extra features for kids like a splash pad, water slides and/or a lazy river.
- Fitness center, many offering organized classes … but rarely are there playgrounds.
- Tennis courts, volleyball courts and more outdoor sports facilities.
- Trails for walking and bike riding.
- One/more clubhouses with extra features like a business center.
- One/more restaurants indoors and outside. You need to look closely at your HOA documentation as many communities include a food charge in your HOA fees. Use the $75/mo ($750/yr) or lose the credit.
- Golf club membership. with extra features like a putting green.
- Movie theater and a game room.
- Maintenance and repairs for common areas including streets, sidewalks, street lighting, landscaping and more.
- Utility (electric, water, trash pickup, etc) costs for pools, lighting, irrigation and more.
The truth is you won't use very many of these HOA benefits but you'll pay for all of them for as long as you own your house. I've taken my granddaughters to my community pool five or 6 times in a year. We've played tennis twice as most of the time, they prefer riding bikes or roller skating.
HOA Coverage for Typical Homeowner Costs
- Basic cable, telephone and Internet service.
- Landscaping services for lawn and shrubs.
- Exterior pest control which is a major problem in Florida.
- Trash pickup.
- Home security monitoring.
- Exterior home maintenance and repairs including new roofs after hurricane damage.
- Insurance covering building exteriors and repairs like roofs torn off.
- Cleaning building exteriors including window washing.
CDD Fees When Buying a House in Florida
Home buyers understand the need for property taxes that pay for local government services from schools and police to building and maintaining roads, sewers and more. This property tax structure enables the cost of managing these services to be centralized and shared across those who live in a town, city or county.
Unfortunately responsibility for infrastructure is much different (and confusing) in Florida. The Florida Uniform Community Development District Act of 1980 allows:
- Local government to pass responsibility for building, managing and financing community infrastructure to builders.
- Builders to form Community Development Districts (CDDs) to issue municipal bonds that finance building out the community infrastructure they need to support their developments.
- Builders then pass these development costs to home buyers in the form of CDD fees. These fees show up on your property tax bill and can be deducted when you itemize your personal income taxes.
- Unfortunately many realtors don't understand CDDs and often their cost is missing in online listings so home buyers get stuck with these extra costs at closing …
- CDD fees continue forever, even when bonds are paid off. Once create, the CDDs remain in place, in theory to maintain the infrastructure that could (should) be turned over to the HOA and/or government agencies.
The theory is CDDs allow community services to be built earlier in the development process and owners/users control them as they're paying the CDD fees. The reality is homeowners don't gain control of even HOAs until development is almost complete.
My bias should be obvious by now so here's what I don't like about CDDs
- The CDD doesn't go away when the bonds used for development are paid off. The CDD could (should) transfer maintenance and repairs to government agencies and/or the HOA … but it doesn't. It continues forever, costing homeowners $100/mo or more for little reason.
- Multiple CDDs building out infrastructure individually, is inefficient and costly. Collier County has 26 CDDs (map above) which isn't as efficient as one government agency. In contrast, the Collier County Schools is one district managing 48 schools. Think about the waste and added costs if there were 24 school districts?
- Florida is unlike any other state where I've lived but there's more going on here. As I'm watching the failed rollout of the Covid-a9 vaccine, the CDD structure feels to me like the privatization of government. Even worse, it feels like a new form of redlining where communities only get services if they pay for them via a CDD!
CDD Fees Pay for What?
This article is the first of several about buying a house in Florida and the impact of CDD fees in addition to property taxes and HOA fees. Here are the things that CDD fees can pay for:
- Community roads (researching sidewalks), bridges, culverts and street lights.
- Water supply lines, sewer lines, waste water management and …
- In Florida, water management and control (including mosquitos) which is a huge requirement.
- Trash collection and disposal … which seems like it would make more sense done by larger government agencies?
- Security but not anything that falls under purview of the police … but seems redundant with HOA security?
- Investigation and remediation of environmental contamination on the land being developed.
- Conservation areas, parks and recreational areas.
- Parking infrastructure … may relate more to commercial CDDs but further research needed.
And some rather surprising CDD items:
- Public transportation including buses, trolleys and transit shelters.
- Ridesharing facilities and services.
- School buildings and related structures.
- Fire prevention and control … needs more research, e.g. do CDDs run fire stations?