Folsom is poised to settle a long-running dispute with affordable-housing advocates over how much new development must serve low-income residents.
The proposal, to be considered by the City Council on March 26, requires developers to set aside 10 percent of projects for low-income housing, a reduction from the current 15 percent threshold that remains in dispute.
The city has had an on-again, off-again battle with affordable-housing advocates for more than a decade. Its latest fight stems from Folsom's attempt in 2011 to scrap its affordable-housing requirement altogether, a move rejected by a Superior Court judge.
The current proposal stems from mediation talks Folsom launched while the city filed its own appeal.
"They wanted to prove that inclusionary housing is dead," said Bill Kennedy, managing attorney at Legal Services of Northern California, which battled Folsom in court. "But the fact that they lost the lawsuit and agreed to settle sends a signal."
Housing for low-income residents historically has been out of reach in the sprawling Sacramento County suburb. The pro-growth city decried its affordable-housing mandate as an impediment to new construction, especially during the housing bust.
City officials are hailing the settlement as a way to "work with the market and still get affordable housing."
"It's not an all-or-nothing deal. The whole planning profession is the art of mediation and finding win-win," said Folsom's community development director, David Miller, who added that the compromise would create new development, both affordable and at market rates.
Officials had previously maintained that any affordable housing clause would hamper growth, since builders typically subsidize low-income units by raising prices on the market homes.
Legal Services of Northern California and the Sacramento Housing Alliance argued in court that the elimination of the ordinance conflicted with Folsom's own housing element.
The state doesn't require cities to pass an affordable-housing ordinance but does require a community to address low-income housing needs in its housing element, said Bob Erlenbusch of the Sacramento Housing Alliance.
Under the proposed settlement, the makeup of the low-income housing units will also change. Three percent will be allocated to very low income which requires greater subsidies down from 10 percent in the old ordinance. As a result, developers will be paying far less, which city leaders say is the first step to promoting new growth.
The ordinance comes as Folsom's housing market is heating up. Last year, the city issued 156 new single-family home permits, up from 56 units in 2011. Miller expects the number of new homes to top 300 this year. "We haven't seen this kind of development since 2006," Miller said.
Housing advocates have long criticized Folsom for keeping low-income earners away.
The average price for a rental apartment in Folsom increased from $1,176 in 2008 to $1,253 in 2012 a 6.5 percent change, according to apartment data tracker RealFacts. During the same period, the average rental rate in the Sacramento metropolitan area dropped 1 percent.
"They haven't built up housing for lower-income people even though they have jobs for them," said John Foley, executive director of Sacramento Self Help Housing, a nonprofit that assists low-income workers find homes.
The settlement, though, is far from final. Kennedy noted that the City Council has a history of being "unpredictable" and may strike down the proposal. "Essentially, it's a developer-elected council," he said. "The builders finance all of the campaigns."
A Bee review of campaign finance documents from 2012 indicate that a slew of home-builder interests donated to several members of the City Council.
Councilman Ernie Sheldon received about $2,500 from such interests. On the giving list: Sacramento real estate tycoon Angelo K. Tsakopoulos, owner of AKT Development, and several of his relatives.
Sheldon defended the donations, noting that he has an "established record of being fair." But he added that the perception of developers influencing the council is certainly present, given that multiple members are widely known to be pro-business.
Mayor Steve Miklos is a licensed real estate broker, Vice Mayor Jeff Starsky is a corporate lawyer, and Councilwoman Kerri Howell is a civil engineer.
Miller, the development director, stressed that the city is still committed to delivering on its promise of affordable housing.
Forestwood at Folsom, an affordable complex on Greenback Lane, opened last May and now houses 98 residents. A second development with 80 units on Sibley Street is under construction.
Call The Bee's Richard Chang, (916) 321-1018. Follow him on Twitter @RichardYChang.