Breaking Ground
Desiree Francis, Managing Vice President, Head of Community Finance at Capital One
By Darryl Hicks
7 min read
Capital One ranks among the most active investors of Low Income Housing Tax Credits.
As managing vice president of community finance, Desiree Francis oversees Capitol One’s lending and investing efforts, which annually exceed $1 billion, primarily through its LIHTC investments. The company’s Social Purpose program also invests in resident services that support resident and community well-being.
Francis joined Capital One in 2008 to establish loan and investment originations in New York and New Jersey that promote affordable housing and support community revitalization. In 2014, Francis began leading the Capital Officer Originations team, which seeks to source and originate financing opportunities within Capital One’s footprint.
Prior to joining Capital One, she served several different roles within Citi Community Capital and in the Bank Supervision Group at the Federal Reserve Bank of New York. Francis currently serves as president of the Affordable Housing Investors Council (AHIC), a national organization for investors in affordable housing.
Tax Credit Advisor sat down with Francis to discuss more generally as president of AHIC the issues and trends that LIHTC investors are seeing.
Tax Credit Advisor: Aside from CRA reform, which we’ll get to in a moment, what are your biggest priorities as president of AHIC in 2023?
Desiree Francis: AHIC represents members across the affordable housing investment sector, from banks to insurance companies to other corporations. Our primary goal is to continue educating and providing resources to our members that can help guide their decision-making and advance the industry as we face a significant affordable housing gap in the U.S.
In 2023, we are launching a search for a new executive director to replace Julie Hertzog, who is retiring at the end of the year after 12 years with AHIC. As we search for a new director, we also intend to engage members and stakeholders in conversations about AHIC’s mission to explore where we can provide resources related to other investment opportunities beyond LIHTC and consider how these other investment types can impact affordable housing moving forward.
TCA: Our readers share your concerns about the proposed changes to the Community Reinvestment Act (CRA) and the potential harm those changes will have on the LIHTC program and expanding affordable housing in America. What impact, if any, has the proposed rule had on LIHTC investments, pricing, etc. over the past several months?
DF: Data from the National Low Income Housing Coalition estimates the U.S. has a shortage of seven million affordable rental homes for extremely low-income renters. Only 36 affordable and available rental homes exist for every 100 extremely low-income renter households. And according to the National Association of State Housing Agencies, the housing credit is now the main tool for creating and preserving affordable rental housing: it has financed more than 3.6 million homes for 8 million households, serving veterans, seniors, the formerly homeless, people with special needs and working families – from teachers and nurses to administrative employees and social workers.
LIHTC investment is critical in closing the supply and demand gap within the affordable housing space, and disruptions could lead to further imbalance.
While the industry has faced uncertainty about the proposed changes to the CRA there has been minimal disruption over the past several months. We remain concerned that some of the contemplated changes to CRA would diminish the resources flowing to the LIHTC program and shrink the number of new housing units it creates in a period of unprecedented need.
TCA: How are you and your colleagues in AHIC thinking about the new Global Minimum Tax and the potential impact it will have on the LIHTC market?
DF: Because AHIC’s membership base is so broad, different institutions leveraging LIHTC may face varying levels of impact from the Global Minimum Tax. AHIC is optimistic that the final Pillar Two Global Minimum Tax guidance that protects housing credit investments that are accounted for using the equity method and not consolidated will alleviate the issue for most investors.
TCA: Have there been any discussions within AHIC to attract potential new LIHTC investors to help minimize the impact of future rulemaking?
DF: AHIC is always open to new members—regardless of industry or organization type—who are interested in and committed to being limited partner investors in affordable housing primarily for their own portfolio. We offer prospective members the opportunity to attend a meeting prior to submitting their application to ensure they see value in the organization and our resources.
TCA: Resident services are a critical aspect of every LIHTC project. Do you see this as an area where LIHTC investors can play a bigger role?
DF: The industry focus on resident services poses an opportunity for LIHTC investors to play a bigger role. As we continue to develop materials to serve as resources for our members and the industry, AHIC has developed a new resource, titled Resident Support and Property Management Considerations. A product of AHIC’s Diversity, Equity and Inclusion (DEI) Pledge, the tool frames questions that investors and syndicators may seek to ask their sponsor partners about the way their housing credit properties support and empower residents and meet their needs. It includes questions around community space usage to help determine whether these elements are adding value and positively impacting residents; the type and efficacy of services provided to residents; and anti-eviction policies.
Additionally, AHIC is a founding member of the Multifamily Impact Council, which is developing a framework of impact principles and reporting guidelines for the multifamily community to create a consistent approach to measure resident and community, among other, impacts.
TCA: Over the years, we’ve written extensively about investor exits from LIHTC projects. What best practices have you and your fellow AHIC members adopted to make these transitions go more smoothly?
DF: AHIC is primarily focused on providing members with education and information to help guide decision-making. In 2018, our Asset Management Committee developed a paper that outlines issues for investors to consider when exiting a partnership. A key recommendation is that investors evaluate and understand dispositions considerations when making new investments.
TCA: What is your proudest achievement thus far for AHIC?
DF: I’m proud of the great strides AHIC has made in addressing some of the toughest challenges facing the affordable housing industry, including racial equity and developing future talent. First, AHIC launched an emerging leaders program, which is helping to build the pipeline of future affordable housing leaders. Additionally, we have created resources to advance and support our racial equity and social justice goals. One example is our recently updated underwriting guidelines, which aim to open pathways to underrepresented developers. This set of guidelines offers questions and approaches for mitigating risk while promoting the inclusivity of groups who may not have had access to certain funds and resources due to structural inequities.
TCA: Besides the issues we’ve already discussed, what other noteworthy issues or trends are LIHTC investors keeping a watchful eye on in the marketplace?
DF: In addition to CRA changes, investors are looking at additional federal actions and recommendations to maximize LIHTC funding opportunities, such as reducing the 50 percent Private Activity Bonds (PAB) financing requirement. Currently, a multifamily property qualifies for four percent LIHTCs only when at least 50 percent of the total development cost—including land—is financed with PABs. Reducing the 50 percent PAB financing requirement to 25 percent would create additional availability, which in turn could be allocated to finance more affordable rental properties.
