BOSTON - Harvard University said on Thursday that it cannot afford to complete construction of its $1 billion science complex right now and will pause its campus expansion outside its Cambridge, Massachusetts, home.

Harvard, the world's richest university with a $26 billion endowment, said it plans to complete the science complex in the Allston neighborhood of Boston to street-level early in 2010.

The announcement underscores just how hard-hit Harvard was by the financial crisis when the endowment lost 27.3 percent during the year that ended June 30.

Harvard did not say when it would finish the science building, originally expected to open in 2011 and slated to be the cornerstone of an ambitious 50-year expansion plan designed to increase the campus size by 50 percent.

We concluded that the most prudent course is to delay the next phase of construction while continuing a rigorous analysis of strategies for resumed activity, including co-development, Harvard President Drew Gilpin Faust wrote in a letter to the community on Thursday.

The decision to pause was not entirely unexpected. Faust told students, faculty, and alumni in February that Harvard planned to slow down the pace of the expansion.

Harvard, like most large U.S. universities, relies heavily on its endowment to pay its operating budget. To cut costs Harvard has announced hiring and salary freezes and limited the type of food students are served in their dormitories.

The altered financial landscape of the University, and of the wider world, necessitates a shift away from rapid development in Allston, Faust wrote.

The science complex was supposed to house the Harvard Stem Cell Institute and other researchers from the school's science faculties. From the beginning, the project has been controversial with residents in the working-class neighborhood who have worried about the long construction periods and empty properties awaiting development.

(Reporting by Svea Herbst-Bayliss; Editing by Eric Beech)