Alberta’s Advantage in Question as Record Migration Creates Housing Affordability Issues

Alberta is a victim of its own success. Having witnessed unprecedented migration in recent years, Calgary and Edmonton are now grappling with rising home prices, apartment rent increases and a steady decrease in multifamily vacancy rates.

“Alberta is going through the same housing crisis as the rest of Canada but the recent influx of people to our province has exacerbated the impacts here,” says Greg Kwong, CBRE’s Canadian Prairie Regional Managing Director.

In 2023 alone Alberta welcomed a record 202,324 new residents, representing 4.4% population growth. This included a national record for interprovincial migration, with a net gain of 55,107 people moving from other provinces, primarily Ontario and British Columbia.

“People come to Alberta for a lower cost of living, a strong job supply and because it’s a great place to raise a family,” says Kwong. “And although it’s still cheaper to live here than in most other provinces, rent is much higher than five to six years ago, and it’s negatively impacting Albertans who have lived here for years.”

Priced Out

Albertans are facing some of the fastest-growing apartment rents in Canada, with rent appreciation at its highest in over 40 years. The province’s average rent reached $1,746 per month in May 2024, up 16% since last year. Three-bedroom units led the increase, with rents rising 21.0% year over year. Despite the recent upward movement in rents, Alberta’s average rent remains more than 20% below the national average of $2,150.

In Calgary, average rent reached $2,089, 9.0% higher than last year, while Edmonton’s grew 13.0% year-over-year to $1,514 (in comparison, Vancouver’s average rent is $2,982 and Toronto’s is $2,757). Alberta’s average vacancy rate dropped to 2.0% at the end of 2023, according to CMHC; Calgary’s fell to 1.4% while Edmonton’s decreased to 2.4%.

“Rents have appreciated significantly,” notes CBRE Edmonton‘s Managing Director Dave Young. “But we’re still nowhere near Toronto and Vancouver rents.”

Cities Take Action

Local governments are working to address the added pressures of the migration boom. Calgary’s city council has recently approved citywide rezoning to increase density, allowing the construction of duplexes, townhouses and rowhouses. Edmonton passed a similar motion in late 2023, overhauling its zoning bylaw for the first time since the 1960s.

Both cities have faced backlash as homeowners worry about the potential impact of high-density development on the makeup of their neighbourhoods and the value of their homes. Some have voiced concerns about gentrification, arguing that increasing density would replace older, more affordable housing with pricier properties. But the ‘not in my backyard’ sentiment isn’t the only obstacle ahead.

“These changes will allow for increased density and infill but I am concerned that this will force development in areas that don’t have as much demand,” says Young.

The new changes incentivize development in urban centres, even though tenant demand is traditionally larger in suburban nodes. “Our suburban employment and post-secondary nodes are strong drivers of the local economy,” says CBRE Edmonton’s Thomas Chibri. “People want to live close to where they work, so if we don't allow suburban development they will move elsewhere.”

Another unintended consequence of infill development is the lack of servicing capacity developers may encounter in some areas. Existing water, sewage, drainage and electrical capacities may not be sufficient to sustain high-density developments, resulting in additional costs for developers.

Kwong adds that a shortage of skilled trades workers could threaten development activity, with Alberta’s construction industry short-staffed by as much as 20%. Immigration provides little relief; 2% of newcomers to Canada are working in construction and trades, down from 4%. “There’s no lack of will to build more housing,” says Kwong. “We need supply now, but increasing costs, delays and province-wide labour shortages are holding back construction.”

Retail Benefits

Alberta’s population spike has created challenges, but the surge of new arrivals has been a big boon for its retail sector, says Kwong. “Grocery-anchored shopping centres are booming and restaurants all over Calgary are bustling with people.”

Young says Alberta’s retail sector is poised for significant growth as new residents will need places to shop and eat. He believes industrial and logistics will also fare well in the coming years. “Even In an economic slowdown, there’s still a need to maintain and repair equipment that services our economy,” he says. “This puts Edmonton in a stable position to continue creating jobs for the future.”

The province’s economy is benefitting from the influx of young workers, notably tech talent, contributing to diversification. But developing homes for all this new talent will be critical for sustained success. “We need to encourage supply by reducing the costs incurred by developers,” says Chibri. “Whether that be by introducing tax credits, limiting mill rate increases or providing grants and incentives, we have to find ways to encourage more supply while improving affordability.”

Young believes Alberta’s current growth rate can be sustained in the long term. “Our population is young, educated and growing. Jobs are abundant. Our economy is diversifying,” he says. “There’s very little that Alberta can’t do when we put our minds to it. But the lack of affordable housing could threaten Alberta’s advantage if we don’t tackle this challenge now. As we can see elsewhere in Canada, there’s no time to wait.”