Three major banks have stopped offering mortgages for homes at the former Hunters Point Naval Shipyard, The San Francisco Chronicle reports, describing the measure as “an extraordinary move likely to complicate the already troubled effort by the city and developers to transform 500 acres of waterfront in San Francisco.”
Wells Fargo, Chase and Citi sold the newspaper they aren’t providing loans to any buyers now, because of unresolved questions about the safety of the land where mega-developer Lennar Corp. has built about 450 homes and is planning thousands more.
The 75-acre hilltop site known as Parcel A is next to the nation’s largest Superfund site, “hundreds of acres contaminated with radioactive materials spread by the Navy during the Cold War and undergoing cleanup since the early 2000s,” the Chronicle reported. “In recent years, a scandal involving falsified radiation tests has marred the effort, raising concerns that toxic hazards were missed or covered up — and spawning lawsuits against Lennar from angry homeowners.”
Lennar said in a statement that multiple banks are still lending to home buyers. However, estate and economics experts said the decision by the three banks is exceptionally rare and reflects an atmosphere of uncertainty about the shipyard and its future..
“If you freeze financing on that — wow,” said Denis DeSaix, a real estate appraiser and incoming president of the Northern California chapter of the Appraisal Institute. Depending on the extent of any contamination and the difficulty of removing whatever hazards exist, “It could be a ghost town there for a while.”
Chris Thornberg, founding partner of Beacon Economics, an economic consulting firm based in California, said the banks’ move could cause serious ripple effects, possibly making it more difficult to pay off construction loans, upsetting the development’s investors and potentially leading to more lawsuits.
“If the banks aren’t lending to people to buy these homes, then everything else falls apart,” Thornberg said. “Basically all hell breaks loose.”
Records from San Francisco’s Office of the Assessor-Recorder indicate that only one housing unit sold in the hilltop area from Sept. 1 to Dec. 12.
Lennar said in a statement that the home area at the shipyard is safe and that the company has sold and closed homes since August.
“As the facts become more widely known, we believe the lending environment will normalize and more banks will provide loans,” the company said.
Headquartered in Miami, Lennar is the nation’s largest home builder, completing almost 30,000 new homes last year and generating $12.6 billion in annual revenue. The shipyard development is an $8 billion project fueled in part by EB-5 funds, a U.S. immigration program that trades green cards to foreign financiers in exchange for job-creating investments.
The shipyard is the city’s largest redevelopment project in a century, part of a new bayshore community where developers have planned 12,000 homes, more than 3 million square feet of office space and 300 acres of parks. Lennar is in charge of the first phase, and FivePoint Holdings is handling the second wave, which includes homes at nearby Candlestick Point. Between the two phases, about 750 housing units have been created so far, and Lennar is currently selling a new outcropping of luxury townhomes that start at $1.4 million.
The Parcel A home area was transferred from the Navy to the city in 2004; multiple agencies declared it safe for development and free of harmful radioactivity. “But in 2014, whistle-blowers who had worked for lead cleanup contractor Tetra Tech emerged and said that the cleanup process on the Navy-owned portions was fraudulent and broken. Two former shipyard workers also raised questions about possible contamination on Parcel A.”
Since then many of the whistle-blowers’ allegations have been confirmed by government agencies. This year the Department of Justice announced that two former Tetra Tech cleanup supervisors had admitted to faking radioactivity tests to make the site appear cleaner. Tetra Tech has said that all problems were caused by a few “rogue” employees, but both the Navy and the U.S. Environmental Protection Agency have concluded that the company’s radioactivity measurements can’t be trusted and the site should be retested.
The Navy has said that may end up costing taxpayers more than a half-billion dollars and could delay the transfers of other shipyard parcels by about a decade.
Uncertainty about the extent of contamination has caused some homeowners to question the safety of the hilltop home area, the newspaper reported. “The California Department of Public Health recently agreed to perform a limited search for radiation, walking across some pieces of the parcel with handheld and machine-towed detectors that can see one type of radiation but not other types.”