HOA Fees: What Are They And What Do They Cover?

Homeownership can come with a number of expenses, including homeowners insurance, mortgage insurance, property taxes, mortgage interest, landscaping and upkeep. However, not all homeowners will have the same costs, of course. For example, if your home is located in a community with a homeowners association (HOA), you’ll likely have to pay HOA fees, which help fund the association’s projects and maintenance costs.

Let’s take a close look at what HOA fees are, how they may be used in your neighborhood and how much they could potentially cost you depending on where you live.

HOA fees (sometimes called HOA dues) are monthly, quarterly or annual charges that homeowners association members pay to their local HOA. Condominiums and co-op communities can charge residents HOA fees just like a more traditional neighborhood would, but no matter the community type, this expense helps cover the cost of maintaining shared amenities and ensuring upkeep of community buildings.

Since an HOA is a nonprofit organization, association members – usually homeowners who live in the community – share the responsibility of enforcing the HOA’s bylaws and managing common areas. HOA fees make this possible by funding the association’s initiatives.

As previously mentioned, homeowners association fees generate the income needed to create and maintain the community’s amenities, but they’ll typically be used for more administrative purposes, too.

Your HOA fees may pay for:

• Civic services: Some HOA dues help cover the cost of waste management, snow removal, pest control, lawn care, utilities and security.

• Shared area maintenance: The expense of maintaining shared areas – such as swimming pools, fitness centers, clubhouses, tennis courts and outdoor dining spaces – are funded by HOA payments.

• Community services: Many high-end HOAs offer amenities that include valet services, concierge or on-site fitness trainers. These extras are managed and paid for by your association.

• Liability insurance: HOAs are required to purchase insurance coverage for any injuries that could occur on community property. Homeowners will still need to get their own insurance policy, though.

Before you buy a home connected to an HOA, you should take the time to research the HOA’s  covenants, conditions and restrictions (CC&R) along with its amenities. This extra step will guarantee you understand what’s allowed in the community and the services are available to homeowners.

Depending on your neighborhood, your HOA fees can vary widely. The average monthly HOA payment is $170, according to iPropertyManagement.com, which pulls HOA statistics from the U.S. Census Bureau’s American Housing Survey and various other sources. But in a place like New York, which is home to some of the country’s highest-cost areas, the median HOA fee is $570 and annual HOA fees can be as high as a couple thousand dollars or more.

HOA dues can also depend on the type of property you own. For instance, a single-family home may have higher homeowners association fees than a condo. Or, a co-op may have higher fees than a condo association.

Learn more about HOA dues with these frequently asked questions.

Are HOA fees tax-deductible?

Unfortunately, for most homeowners, HOA fees aren’t tax-deductible unless your house is used as a rental property. In that case, the HOA payments you make could be deducted as a business expense. Talk with a tax preparer to learn more about this tax benefit of real estate investing.

How much of an HOA fee is too much?

Since HOA fees largely depend on the community you live in, it’s hard to tell whether this cost is too high. The best way to determine whether an HOA due is too much is to compare it against other local associations’ fees and your own budget.

Are HOA fees worth it?

Fees help the HOA board keep common areas well-maintained and, hopefully, prevent property values from falling. But if you believe the monthly dues are too high, it might be a good idea to avoid moving into the community. On the other hand, if you want to take advantage of shared amenities, an HOA could be right for you.

Can HOA fees be waived?

If you’re moving into a new home with an HOA, you’ll most likely have to pay fees. If the HOA is a voluntary association, you could opt out and avoid the fees. However, this may mean you won’t have access to shared areas, such as a community swimming pool or clubhouse.

Can I be evicted for not paying my HOA fees?

Failure to pay mandatory community association fees can result in suspended privileges, late fees, legal actions and even a lien. And while HOAs can’t evict you the same way a property owner can evict a tenant, in some states, if a homeowner doesn’t pay their fees for long enough, the HOA can foreclose on the house.

Is my HOA fee included in my mortgage payment?

In most cases, your homeowners association dues won’t be included in your monthly mortgage payment. That’s because your fees will go directly to your HOA and not your mortgage servicer.

HOA fees are often a necessary expense if you buy a home connected to a homeowners association. Although pricey in some cases, these payments are intended to carry out several functions, which include helping ensure that members of a community enjoy shared amenities in well-maintained areas.

Whether you’re thinking of purchasing a home in a neighborhood that’s part of an HOA or not part of an HOA, consider getting initial mortgage approval now to help strengthen your offer and speed up the buying process.