While rapidly rising house prices may be welcome news for current homeowners, many Canadians are feeling the crunch. As prices soar across the country, housing affordability has deteriorated to the worst level in 31 years, pricing whole generations out of the market.
Unsurprisingly, the impact is greatest in Toronto and Vancouver. And despite recent price growth, housing in Alberta remains comparatively affordable. The share of household income needed to cover ownership costs in Alberta is around 30%, compared to Toronto and Vancouver’s 61.9% and 64.3% respectively.
Unfortunately, Alberta’s relative affordability doesn’t do much to soothe people who are struggling to afford a home.

A little bit of history on housing prices in Alberta
In Alberta, housing prices (like nearly everything else) are tied to the price of oil.

Alberta’s boom years were accompanied by rapidly increasing housing prices. This trend came to a screeching halt in 2014 when oil prices plunged, and Alberta was sent into a recession.
Among a sea of resulting challenges, one positive outcome was that housing affordability improved across the province.
COVID-19 helped too, as low interest rates and declining property values boosted affordability across the country—especially in Alberta, where markets were still struggling to recover from the 2014 crash.
And then everything changed.
The housing price crunch
After the housing sales slump in 2020, Canadian real estate had a record-breaking year in 2021. Over 666,000 properties changed hands last year—surpassing the 10-year average by 30%. One realtor from Toronto observed that “2021 was like Black Friday.”
As the pandemic dragged on, people developed an appetite for bigger houses with a home office and extra outdoor space. And they could afford it. Those who remained employed throughout the pandemic accumulated a healthy savings account and were anxious to spend again. Aided by rock-bottom interest rates, demand for houses skyrocketed.
Unfortunately, record-setting demand was met with record-low supply. And this mismatch drove housing prices higher. Last year, the national average sale price rose 17.7% (9.9% in Alberta), negating the positive effect low interest rates had on affordability.
And it’s only likely to get worse. Rapid price growth, combined with high inflation, slow wage growth, and looming interest rate hikes, is a recipe for a substantial decline in housing affordability across the country.
Options for re-balancing the market
A balanced market is critical to easing the upward pressure on housing prices. And there are two ways to approach this re-balancing—through supply or through demand.
Let’s talk about supply first. Canada has a chronic structural housing shortage with the lowest housing stock per capita in the G7. And within Canada, Alberta is one of the worst, needing to build 103,000 units just to reach the Canadian average. Hampering supply is long approval timelines, rising infrastructure and materials costs, NIMBYism, and exclusionary zoning. Moreover, persistent supply chain challenges are making things worse, rising building costs and slowing construction timelines.
However, building homes is a slow process (even with supportive policy), and it would take years of significantly above-average growth to meaningfully impact prices.
With a limited ability to increase supply in the near term, let’s look at demand. Tackling the demand side of the equation involves designing policy to reduce consumers’ buying power enough to lower prices. Several institutions have policy levers available to them to accomplish that goal.
The Bank of Canada (BoC) can cool demand by increasing the cost of borrowing money. But last month, in a controversial decision, the BoC decided not to raise the overnight rate, providing buyers with at least another month to rush into the market before rates likely rise in March.
This step risks lowering affordability in the short term but will have the longer-term effect of cooling the market.
More helpful to the average homebuyer, the Office of the Superintendent of Financial Institutions could increase down-payment requirements or stress test rules in cases where the buyer is not a primary resident or creating new housing stock.
And the government could use taxes to discourage speculation or foreign purchases by leveraging non-resident taxes, vacancy taxes, and anti-flipping taxes. Steps could also be taken to loosen zoning requirements for higher-density urban infills.
Conclusion
While Alberta’s housing market isn’t quite as expensive as other Canadian markets, the situation remains grim for the next generation hoping to secure a home.
There is a crucial role for policy to ensure that housing is attainable for average Canadians. In the short-term, demand-side measures can help bring this speculative run to a halt. And in the long-term, all levels of government need to implement policy that increases the supply of housing and closes the structural housing deficit for good.
