Quick glance at Alberta's Housing & Development Trends for 2024/25
/1. Record-Breaking Housing Market Surge
In 2024, Alberta’s housing market is experiencing a seismic shift. The surge in demand has caught everyone off guard, driven primarily by unexpected population growth. Scott Fash, CEO of BILD Alberta (representing developers and builders), succinctly puts it: “We are building more than we have ever built.” The numbers speak volumes: 3,679 housing starts in February, marking a staggering 65.6% year-over-year increase1. This is creating many problems for Albertan’s as demand is not meeting supply. Home and rent prices are rising steadily due to this and other factors such as inflation and interest rates. None the less this means construction in Alberta is set to be a booming industry in the next couple of years. More builders and developers are needed to meet this demand
2. The Population Boom and Housing Gap
Alberta’s economic dashboard predicts that the province’s population will surpass five million by 2027 and reach six million by 2039. However, despite this growth, Alberta faces an immediate housing gap of 130,000 to 170,000 dwelling units. The reasons behind this shortfall form a three-legged stool:
Skills and Labor Shortages: The persistent scarcity of skilled workers in the construction industry remains a challenge. The booming industrial and commercial sectors are willing to pay higher wages, attracting both skilled and unskilled individuals into home construction. Unfortunately, this influx sometimes dilutes the quality of workmanship.
Land Development and Infrastructure Costs: Balancing the need for new housing with the costs of land development and infrastructure upgrades is akin to walking a tightrope. Municipalities grapple with the need to reduce red tape and at the same time balance the needs of the communities
Rental Housing Deficit: Over the past two decades, rental housing has lagged behind due to unattractive profit margins for developers. Now, Alberta’s rental market is catching up, with rents rising at a faster rate than in any other province. The challenge lies in bridging the 20-year rental housing deficit.
3. Interest Rates, Inflation, and Homeownership
Albertans face a double whammy: rising interest rates and soaring inflation. These factors significantly impact homeownership and development:
Interest Rates: When inflation surges, the Bank of Canada may decide to increase interest rates to curb it. Consequently, the interest rate on mortgages tends to rise. For those with variable rate mortgages, this can directly affect their monthly payments. The costs extend beyond the mortgage itself, impacting debt payments associated with this critical purchase.
Inflation: The cost of living has skyrocketed for Albertans. From groceries to gas, inflation affects everyday expenses. For renters or prospective homebuyers relying on personal vehicles, the past year has been financially challenging2. Moreover, post-pandemic price increases have pushed the average home price to $400,000, while wage growth struggles to keep pace, resulting in significant affordability challenges for residents.
4. Quality Concerns and the Apprenticeship System
As housing construction ramps up, concerns about quality arise. The rush to build has led to an influx of unskilled workers, potentially compromising long-term durability. The trades are witnessing a shift toward micro-credentials, where individuals specialize in specific aspects of a trade. While expedient, this approach lacks the well-rounded knowledge that seasoned journeymen bring to the table. Maintaining a robust apprenticeship system remains crucial.
5. Collaborating for Sustainable Solutions
Federal and provincial collaboration is essential. For decades, the federal government has “downloaded” social housing responsibilities onto the provincial level. Balancing these responsibilities while addressing the housing shortage requires innovative solutions and a united effort.
In summary, Alberta’s construction and housing landscape is dynamic, driven by population growth, economic conditions, and the urgent need for more housing units. As we move into 2024 and beyond, stakeholders must work together to build sustainably, ensuring both quantity and quality in our housing stock.
