Protecting Alberta’s affordability advantage means celebrating stalling home prices

Alberta is two steps ahead of BC, Ontario and Quebec when it comes to housing affordability. This economic advantage should be protected by all Albertans – and especially by political leaders as they gear up for the May 2023 election.

Data confirm that housing affordability has eroded in Alberta compared to earlier decades – a serious problem that must be addressed with urgency.  Yet the same data show that Alberta remains ‘relatively’ affordable compared to many other parts of Canada, according to a new study by Generation Squeeze.

Albertans can protect this affordability advantage by celebrating stalling home prices, because holding the line on home values will help keep prices connected with local earnings.

The typical young Albertan must work full-time for 9 years to save a 20% down payment on an average priced home.  In contrast, the Canadian average is 17 years, and in Greater Toronto and Metro Vancouver, it’s 27 years.

It’s good news for younger Albertans that their province has preserved more intergenerational fairness in housing than BC and Ontario. Only 3 more years of work are required to save a down payment in Alberta compared to when today’s aging population started out. In Ontario and BC, it’s 17 more. Average rent for a 2-bedroom in Alberta in 2021 was about $15k per year – a figure that’s still in the neighbourhood of the $13k renters paid in 1981.

While Alberta has a better story to tell about housing affordability than other jurisdictions, it can’t become complacent. 

Housing markets in the rest of Canada may be starting to level out – but they are often doing so with prices remaining at harmfully high levels. Average Canadian homes prices would need to drop $341,000 to make it affordable for a typical young person to carry an 80% mortgage. Or earnings would need to increase to $108,000/year – double what full-time work typically pays Canadians age 25-34.

In Alberta, average home prices would need to fall just $31,000 to make it affordable for a typical young person to carry the same mortgage.  Or typical full-time earnings would need to increase to $67,000/year – roughly 7% higher than current levels.

Former Premier Kenny rightly pointed to Alberta’s more manageable living costs to attract workers from elsewhere in Canada. Today, all political leaders should commit to protecting this asset, to ensure that hard work continues to pay off more in Alberta than in many other places. 

Protection is necessary, because Alberta’s affordability advantage is fragile.  

Just this spring, a surge in average home prices drove up unaffordability – even while home values stalled in Ontario and BC. Fortunately, interest rate hikes by the Bank of Canada to cool food and energy inflation also reduced the availability of cheap credit – which can fuel housing demand by motivating Albertans (and others) to bid up prices. Higher interest rates have helped Alberta home prices tail off – though at levels that invite renewed concern about preserving affordability.

Should the Bank dial back interest rates when inflation in food and energy prices slows, renewed access to cheap credit may once again ramp up housing speculation, driving price increases. If the spring trend is any indication, Alberta housing could be back on the radar of those looking for a ‘good investment’ rather than a place for locals to call home.

Albertans are at a housing crossroads.

With a budget and an election on the horizon, affordability will surely be a central theme. Hanging onto Alberta’s housing advantage means celebrating stalling home prices that don’t grow the gap between prices and earnings to the dangerous levels other provinces are experiencing. Alberta needs to plan now to use the full range of policy tools available to protect affordability, because it will be much harder to restore than it is to preserve what you’ve not already lost. 

Dr. Paul Kershaw is a policy professor in the UBC School of Population Health and Founder of Generation Squeeze

Andrea Long is the Senior Director of Research and Knowledge Mobilization at Generation Squeeze