Roy Scott

For a city awash in foreclosed homes, Stockton, Calif., has a lot of residential development going on.

The city ranked fourth in November on RealtyTrac’s nationwide list of markets where houses are in some stage of foreclosure. In recent months, nearly all resales there have been ­foreclosures, selling on average at prices ­two-thirds below the market’s $404,000 peak in December 2005. Stockton’s ­new-home purchases hit rock bottom last September when only four new houses were sold that month. Through the first 11 months of 2008, the city issued only 155 single-family building permits, versus 610 in 2007. Fortune magazine projects Stockton to be among the country’s five worst housing markets in 2009 in terms of price depreciation.

Beyond the gloom, however, Stockton’s elected officials see a brighter future and have laid out an ambitious expansion agenda to meet the city’s population growth, which is projected to balloon to 578,000 by 2035 from around 286,000 today. Over that period, the city’s General Plan calls for a 75 percent increase in developable land (through an expansion of its urban growth boundary) to 66,740 acres, of which residential development would account for 35 percent (versus 29.7 percent in 2005).

The city has greenlighted no fewer than five major projects that, if completed, would add close to 20,000 homes and 33,000 residents to the city over the next two decades. How many will achieve fruition, though, is anyone’s guess.

The largest, the 3,723-acre, 10,500- home Mariposa Lakes, is embroiled in a lawsuit over its potential impact on the county’s groundwater basin. Conversely, the city in December allowed developer A.G. Spanos to build 488 townhouses, which were supposed to go into its Spanos Park West project, in two other developments, Crystal Bay and a 1,500-unit subdivision called The Preserve, the latter of which the city approved in December.

David Stagnaro, Stockton’s planning manager, thinks one project that has a good shot at moving forward is Sanctuary, a 1,728-acre mixed-use community on nearby Delta Island that, when built out over the next 16 years, would include 7,070 homes (see “Walkable Living,” page 26). This is the biggest project to date for Stockton-based The Grupe Co., which has been developing locally for 43 years and is known for its amenities-rich communities.

Grupe hasn’t been doing much in the way of residential lately. It sold most of the land it owned by June 2006 and “stopped all construction in June 2007,” says Shane Hart, its senior vice president of acquisitions, land development, and marketing. “In fact, we’ve been focusing on our mini-storage business.” Before it starts building houses at Sanctuary, Grupe has at least 2 1/2 years of site improvement and environmental impact review ahead of it, which Hart estimates will cost at least $500,000.

To get Sanctuary off the ground, Grupe had to answer to two masters: the city and a local anti-sprawl group. Stockton’s General Plan stipulates that no new development can have a negative impact on the city’s general fund. So Grupe had to submit its plan with lower pricing and absorption estimates, which was tough, says Hart, because “we need volume of at least 450 homes per year at an average selling price of $500,000 just to start.”

Grupe also did “a lot of outreach” with a local group known as Campaign for Common Ground, which until that point “had never supported a local project,” says Hart. This group has adopted smart-growth guidelines known as the Ahwahnee Principles, developed by forward-thinking architects in the early 1990s (see “Back to the Future,” right)—which Grupe agreed to where they are ­practical. Sanctuary will also be green: Its commercial construction will be built to LEED Silver standards, and its residential to Build It Green standards.

Grupe plans to offer 20 home styles at Sanctuary, and Hart is confident that market conditions will turn by the time building begins. As for external factors out of Grupe’s control, he says Stockton “has done a good job staying ahead of development” by securing water rights.

Learn more about markets featured in this article: Stockton, CA.