After years of legal wrangling, Folsom has settled a long-running dispute with affordable housing advocates over how much new development must serve low-income residents.
The settlement, which housing advocates made public this week, requires developers to set aside 10 percent of new projects for low-income housing, down from the previous 15 percent threshold that had been in dispute.
City officials are hailing the agreement as a victory for both sides.
"We hit a sweet spot here that worked," said David Miller, Folsom's community development director.
At issue was whether the City Council's decision in 2011 to scrap its affordable housing ordinance altogether was legal. The Sacramento Housing Alliance believed it wasn't and got a Superior Court judge to agree.
"We feel vindicated. This wasn't a frivolous lawsuit," said Bob Erlenbusch, executive director of the Sacramento Housing Alliance.
Folsom appealed the ruling but also made overtures to settle the case out of court. The pro-growth city once decried any requirement of affordable housing as an impediment to new development.
Under the March 22 settlement, the affordable housing requirement will stay, though the makeup of low-income units will 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 pay far less, which city leaders say is the first step toward promoting new growth.
"I did an awful lot of diplomacy with the building community to make this happen," Miller said, noting that developers have long resisted subsidized housing.
The city also agreed to a few other concessions, including a $15,000 grant toward construction of a low-income complex.
Housing for low-income residents historically has been out of reach in the sprawling Sacramento County suburb.
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.
Miller said the city remains committed to its low-income residents and touted an 80-unit affordable complex currently under construction on Sibley Street as a showcase of that commitment.
The agreement with affordable housing advocates comes on the heels of a major recovery in the Folsom housing market. The city has issued 62 building permits so far this year, more than the number in 2010 or 2011. Miller expects more than 300 single-family homes will be built in 2013 alone.
"We have a very robust recovery," he said.
Call The Bee's Richard Chang, (916) 321-1018. Follow him on Twitter @RichardYChang.