HOA Fees Explained: What Every Homebuyer Should Know

When you buy a property governed by a homeowners association (HOA), you might gain access to amenities and conveniences that do not come with every home. Those features have a cost that’s covered by the fees associated with owning a home in an HOA. 

HOA dues are sometimes called "common charges" or "maintenance fees." Homeowners pay these fees on a monthly or quarterly basis to help maintain the property and fund improvements. They are a common cost when you purchase a condominium or townhome, as well as with some single-family homes.

Some HOAs have lower fees and basic services, while others have more significant perks. You must factor the association’s fees into your budget, just as you would with property taxes and insurance. If you can’t afford HOA fees on top of your monthly mortgage payments, it could result in potential fines, lawsuits or foreclosure.

• The national average HOA fee is $243 per month; fees are higher in major metro areas like New York and Los Angeles.
• HOA fees are not tax-deductible for primary residences, though you can deduct them on a rental property.
• Before purchasing in an HOA, review the community documents, financial reports and upcoming projects that could impact its fees.

Not every homeowners association is the same, but fees typically cover maintenance, upkeep, common utilities and administrative costs. A portion of the fees may also be set aside in reserve to pay for larger unexpected repairs.

“HOA fees cover the cost of management and items that keep the neighborhood up and running,” explains Jeff Lichtenstein, CEO and broker of Echo Fine Properties in West Palm Beach, Florida. 

HOA fees may be higher in some areas than others. The amenities, services and the area’s general cost of living can influence what homeowners pay.

A portion of your monthly fee goes toward repairing and maintaining common areas and shared structures, such as: 

• Amenities, such as swimming pools, gyms and clubhouses
• Landscaping within shared spaces
• Streets, sidewalks and parking areas
• Exterior upkeep of shared structures, such as the roof and siding

HOA fees usually don’t cover individual homeowner utilities, but they may cover shared services, including:

• Trash removal
• Snow removal (in some areas)
• Lighting in common areas
• Water and sewer (in some cases)

A portion of HOA fees will be set aside and deposited into the HOA’s reserve funds. These funds are intended to cover future major repairs or large-scale projects, such as roof replacement or repairs and renovations in a community clubhouse.

HOA administrative costs are fees that the association charges to oversee the day-to-day operations of the HOA. This includes:

• Salaries for HOA staff, like the property manager or accountant.
• Legal fees and insurance, which is required to cover injuries or damages sustained within the HOA.
• Any costs associated with HOA meetings and communication.

According to the 2023 American Housing Survey from the U.S. Census Bureau, the average cost of an HOA or condo fee in the U.S. is $243. Still, HOA fees vary depending on the property, so there's no one-size-fits-all answer. 

The association's by-laws should provide the calculation and schedule of your HOA dues. These are generally not set amounts and may fluctuate from year to year.

HOA dues are not tax deductible if the property is your primary residence. However, you may deduct the HOA fees from your taxes if the home is purchased or used as a rental property. If you use the rental property for part of the year, you can only deduct a percentage of the HOA fees from your tax return.

• Amenities: More amenities generally lead to higher fees. Expect to pay more if your community has a swimming pool, gym or security. 
• Community size and type: Larger communities may have economies of scale, leading to lower fees per household. Gated communities may also have higher security costs reflected in fees.
• Location: Neighborhoods with higher property values may have higher HOA fees. The area’s general cost of living and insurance costs can also have an impact. 

Before purchasing a home in an HOA, request a copy of the HOA rules, also known as the Covenants, Conditions and Restrictions (CC&Rs) and review its financial reports and fee structure.

“Get a copy of the budget or most recent financial report to see how much they have in reserves,” says Shelly Henderson, co-founder of Henderson Properties in Charlotte, North Carolina. “It needs to be financially stable as a non-profit organization.” 

Additionally, look at the HOA’s spending trends and upcoming projects that might affect fees. Henderson adds that it’s also “a good idea to get a copy of the latest minutes from an annual meeting or most recent board meeting.” 

• Protection of property values: HOAs can protect or even help boost property values by enforcing covenants, which prevent changes that can have a negative impact. Henderson cites examples, such as “parking an RV in the driveway or painting shutters a color that is not the norm.”
• Reduced maintenance: An HOA fee helps maintain the community, with dues typically supporting the upkeep of common areas and green spaces.
• Enhanced amenities: Pools, gyms and other amenities may be staffed, maintained and supported by HOA dues. 
• Sense of community: Living in an HOA can foster a sense of belonging and connection with neighbors.

• Limited control: Property owners may have less control over exterior modifications or landscaping choices.
• Unforeseen expenses: Special assessments can arise for unexpected repairs or projects.
• Strict rules and regulations: HOAs may enforce rules governing everything from parking to pet ownership and guidelines for using your home as a rental property. 
• Financial obligations: If you don’t pay the HOA fees, the association can put a lien on your property, file a lawsuit against you or foreclose on your home.

Before buying a home within an HOA, ask your real estate agent for the HOA board’s contact information to learn more about the community. This will help you decide if the HOA fits your budget and lifestyle.

Here are some questions to ask before buying in an HOA:

• What are the current HOA fees?
• How are fees determined, and can they be increased?
• What is the HOA's financial health?
• What amenities are included in the fees?
• Can I review the HOA's governing documents and recent meeting minutes?

HOA fees cover the cost of management, maintenance and services that a homeowners association provides. "An HOA is ideal for someone who wants to maintain the beauty and integrity of a neighborhood and isn't swayed by the financial piece or is ok abiding by the covenants and bylaws of a community," Henderson explains.

As you determine your homebuying budget, factor in the cost before purchasing a home in a community with an HOA.