As Albertans watch the value of their houses continue to decline, what should homeowners expect from their provincial government?


Premier Ed Stelmach announced in January $7 million in funding for low-income housing in Calgary. “This funding supports strong and healthy communities and is part of government’s overall strategy to create more affordable housing across the province,” he said.

House prices in Alberta are falling faster than any province except British Columbia. So what is “government’s overall strategy to create more affordable housing”? Is there some master plan to depress house prices and rents to make accommodations more affordable? Do our politicians even understand how the broader housing market works?

According to Canada Mortgage and Housing Corp., the 2001 census reported Alberta had 1.2 million “dwellings” of all kinds. This includes detached houses, condos, apartments and mobile homes. Since then CMHC says Alberta has been adding 40,000 more dwellings per year, bringing the total in 2008 to almost 1.5 million.

Although home ownership remains the North American dream, not everyone can or will buy their own house. But whether you purchase or rent, somebody owns it. And owners are getting clobbered. Using an average dwelling price of $300,000, the value of all the structures that shelter Albertans is a whopping $436 billion. While all dwellings like apartment complexes may not be owned locally, houses, condos and mobile homes are the largest component of the personal wealth of most Albertans.

Alberta’s average home price fell 8.9 per cent in the past year. At $300,000 per dwelling, the value lost is $39 billion. This dwarfs the province’s Heritage and Sustainability Funds combined. Technically this makes housing more affordable, assuming there’s a buyer with a down payment and a job.
The U.S. is the poster child for increasingly affordable housing. To the end of last year, U.S. house prices had fallen 26.7 per cent from their peak in 2006, and are now at the lowest levels since 2003. Losses in the value of Americans homes now exceeds $1.5 trillion US. But it was the American drive toward home affordability that is the root cause of the global credit crisis. While most of the blame is directed toward subprime mortgage shysters, American government policy has for decades supported affordable mortgage instruments like Freddie Mac and Fannie Mae to make it easier for people to own their home.

What causes a shortage or surplus of affordable housing? During the great boom of 2005 to 2007, there was huge public debate about skyrocketing rents, lack of accommodations and rising house prices. Rent controls re-emerged as a solution. What was the province going to do about it? The cause was runaway prosperity as thousands flocked to Alberta. Driven by supply and demand, housing responded accordingly. Rest assured this won’t happen again any time soon.

Now the opposite is true. Housing is becoming affordable because the economy is crashing. People are losing their jobs and their ability to pay their mortgages, or even their rent. When you fully appreciate what’s driving this correction, how badly do we really want to solve this problem?

The Conservative position on affordable housing is impossible to understand. During the short-lived inconvenience of the oil boom, to its credit Edmonton rejected rent controls and supported a market solution — massive construction fuelled by ever-rising prices. This building frenzy, combined with a slowing economy, has certainly eliminated the housing shortage.

At the same time, the Tories pursued policies that intentionally slowed down the economy. This affected jobs and ultimately people’s ability to purchase and pay rent. The oilsands were “overheated,” therefore important people like former premier Peter Lougheed espoused the wisdom of slowing things down. There was broad support to increase royalties to put the brakes on continued growth.

But pulling money out of the economy affects employment and incomes. Governments only move money from one pocket to another. They took cash from oil producers ultimately at the cost of homeowners’ personal wealth. House prices are down because nobody can afford to pay. The oil price collapse and credit crisis are having a bigger impact than royalty increases. But the Stelmach government must acknowledge the implications of shrinking the economy.


Affordable housing is a public policy issue that deserves more intelligent debate. Those with the lowest incomes need a place to live. It’s a matter of dignity and survival. But it’s more important to have a job. A robust economy and minimal government interference remains the best solution.