Alberta’s Housing Boom: Will Increased Construction Lower Prices?

Housing construction in Alberta, particularly in Calgary and Edmonton, is at an all-time high, outpacing the rest of the country. New data indicates that the number of new homes being built in these two cities is more than double that of Toronto and surpasses other major Canadian cities. While the surge in construction is noteworthy, some industry experts are skeptical that these new builds will lead to lower home prices, as many have hoped.

A key factor behind this construction boom is the influx of people moving to Alberta, drawn by its more affordable housing compared to other provinces. However, the increased demand has put strain on the housing supply, causing prices to rise despite the increased number of new developments. High construction costs are adding to the problem, making it difficult for builders to offer affordable housing options. The rapid growth in prices is not just due to a shortage of homes, but also to increased labor and material costs, along with stagnant wage growth that hasn’t kept pace with inflation.

Another significant trend in the housing market is the growing demand for rental units, which has been driving much of the new construction in both Calgary and Edmonton. As homeownership becomes more challenging for many residents, rental demand has surged. This shift is leading to more rental units being built, but it also underscores the ongoing struggle for affordable housing, as rental prices have climbed sharply in recent years. In contrast, cities like Toronto and Vancouver are seeing a slowdown in construction, with fewer new projects and a drop in condominium builds due to falling investor interest.

To combat the housing shortage, both Calgary and Edmonton have made efforts to rezone certain areas to increase density. The idea is to allow for more homes in existing neighborhoods, but this approach has sparked controversy. Some residents have contested the changes, with legal challenges even reaching the highest provincial courts. As municipal elections approach, candidates in both cities are debating whether to revise or even undo some of these rezoning efforts. Though the goal of increasing density might help alleviate some of the housing pressure, it has not always resulted in lower home prices, as the cost of development remains high.

Despite the increase in construction activity, housing affordability continues to be a major challenge. Even though more homes are being built to accommodate growing demand, particularly from both domestic and international migrants, prices remain high due to escalating construction costs and the limited supply of affordable options. Developers are largely responding to the demand for single-family homes rather than speculative building, and while there may be a stabilization in the market, drastic price reductions are unlikely in the foreseeable future. Ultimately, while building more homes is part of the solution, it alone won't resolve the affordability crisis that continues to affect Alberta's housing market.