FOLSOM — The City of Folsom is looking to move forward with a major overhaul of its inclusionary housing ordinance following a detailed and much discussed first reading Tuesday night, advancing a proposal that would replace the city’s long-used sales-price formula with a standardized per-square-foot fee model. The update, more than two decades in the making, aims to simplify administration, strengthen legal defensibility, and give residential developers clearer and more predictable cost expectations citywide.
Planning Manager Desmond Parrington opened the hearing by explaining the purpose behind the proposed ordinance revision. “I’m here before you tonight to talk about proposed changes to the inclusionary housing ordinance and the inclusionary housing residential in-lieu fee study that was prepared by Economic and Planning Systems for the City,” he said. Parrington outlined the administrative burdens caused by the current 1-percent-of-sales-price calculation. “One main driver was the significant staff time required to calculate fees based on 1 percent of sales price,” he said, noting that developers often pull permits before they know actual pricing. “We must obtain market studies and enter fees manually,” he added.
According to the staff report submitted by Community Development Director Pam Johns, the existing system “has proven to be administratively inefficient and incompatible with the City’s current fee processing system,” resulting in more than 75 subdivision-specific fees that require ongoing manual entry, recalculation, deed-restriction handling, and annual verification. Johns wrote that a square-footage-based fee “will streamline administration, reduce processing burdens, and provide developers with clearer and more predictable cost expectations,” while continuing to support the city’s affordable housing goals.
Under the proposed ordinance, single-family for-sale units would pay a $3.00 per-square-foot fee, with attached for-sale products such as condos and townhomes paying $2.50 per square foot. Multifamily rental apartments would remain exempt due to feasibility constraints identified in the nexus study.
Amy Lapin, principal with Economic and Planning Systems, presented the methodology behind the study. “The purpose of this effort was to streamline the fee structure, improve transparency and consistency, and create a predictable system that aligns with the City’s long-term affordable-housing goals,” Lapin said. She described how the team calculated the maximum legally justifiable fee based on affordability gaps and workforce-housing demand. While the maximum fee was significantly higher, Lapin emphasized, “We recommend setting the updated fee at about 10 percent of that maximum — similar to or slightly below current average fees.”
Raithel questioned several of the underlying assumptions. “The prototypes — the 1,000 sq ft rental versus 1,500 sq ft condo — did those come from averages of what we’re actually building?” he asked. Lapin confirmed, “They did. We used comparable projects in Folsom and the region and verified assumptions with staff and stakeholders.”
Raithel then raised broader policy concerns. “I’m not in favor of fees for for-sale condos and townhomes. We need more starter homes,” he said. He added that while the study shows marginal feasibility for for-sale attached units, actual market experience differs: “We struggle to build condos but not luxury apartments.”
Raithel also questioned whether income differences between similar-sized rental and ownership units materially affect the analysis. Referring to the $34-per-square-foot maximum impact shown in the study, he asked: “Is that the impact?” Lapin responded, “Yes, that’s the maximum justifiable fee. It’s similar between rental and for-sale; the difference is down payment and qualifying income.”
Councilmember Mike Kozlowski pressed staff on the legal origins and necessity of the program. “My question is about the requirement to charge these fees at all. Is there a mandate for an in-lieu fee program?” he asked. Parrington responded, “It was required by a 2000s lawsuit settlement the city lost.” Kozlowski followed: “Have we satisfied that settlement agreement, or is it perpetual?”
City Attorney Pam Johns answered plainly: “It’s ongoing until changed.”
Kozlowski then explored whether state law alone would require such a program if the city chose to eliminate it. “So if we hadn’t had that settlement, would the state force us to finance construction?” he asked. Johns responded, “No, but the state pressures cities to incentivize affordable housing, and this is one way to do it.”
Councilmember Barbara Leary sought clarification on how regional comparisons were presented in the study. Referring to a slide, she asked, “The slide showing average costs for municipalities — were those averages?”
Parrington replied, “No, based on a 2,600 sq ft prototype. Rancho Cordova’s was set years ago in one specific plan; Davis is an outlier at $21 per sq ft.”
During public comment, Toll Brothers representative Martin Levinsky expressed the development industry’s support for the change. “I think this change makes sense — it makes staff more efficient and helps developers forecast fees,” he said. He compared the alternatives staff considered and concluded that “a flat $3 per sq ft fee — that’s predictable,” adding that Toll Brothers “supports option #3.”
The council then turned toward the question of how to encourage moderate-income and missing-middle housing. Kozlowski suggested, “Maybe we eliminate the fee for any product that meets the moderate-income sale price so we incentivize that missing-middle housing.” Raithel followed by saying he would support that direction: “I’m fine with that — tie it to sale price. A 50-cent discount isn’t much; maybe a $5,000 discount to incentivize that product.”
Mayor Sarah Aquino reinforced the shared council priority. “Staff knows this council wants to encourage condos,” she said. “Maybe come back with ways to incentivize them.”
Parrington explained staff’s rationale for exempting multifamily rentals while applying a lower fee to attached for-sale units. “Rentals already have a $40,000 gap between rents and costs, so we didn’t burden them,” he said. For townhomes and condos, he noted that many products sell well above moderate-income levels, so the fee remained appropriate.
Councilmember Anna Rohrbough voiced support for moving forward, saying the proposed update “helps deliver projects in a timely manner.”
Kozlowski ultimately made the motion: “My motion is to approve the staff recommendation and ask staff to look at other incentives for moderate-income housing that we can institute later.” The council unanimously supported the action.
The ordinance returns for a second reading on January 13 and, if adopted, will take effect February 12, 2026. Per the staff report, the city will notify the North State Building Industry Association and the broader development community and begin indexing the new fee annually to the Construction Cost Index. Johns noted that the in-lieu program has generated approximately $30.5 million since its inception, supporting more than 320 affordable units in Folsom and remaining a critical funding tool for new affordable housing.
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