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Folsom Development Corp. is proposing to build 42 rental units at 862-878 Washington St. under the state’s Chapter 40B affordable housing law. In communities where less than 10 percent of the housing meets the state’s definition of affordable, Chapter 40B allows developers to sidestep some local restrictions if they set aside a certain percentage of the units at below-market prices. Currrently, the On the Stacks Games store is located in a building on the site. A 40R project, which requires more local approvals, had originally been proposed for the site but was withdrawn when neighbors opposed it and it did not get the approval of the Planning Board, said Selectman William Plasko.