Alberta Budget 2025: Homebuilder Stakeholder Brief

Executive Summary

Budget 2025 presents homebuilders with moderating demand conditions alongside significant government housing investment. Housing starts are forecast to decline from 47,800 units to approximately 41,000 units per year as population growth decelerates from 4.4% to 2.5%. However, continued population growth to 5 million, the $655M Affordable Housing Partnership Program, $649M Continuing Care Capital Program, and $150M Seniors Lodge Modernization Program create opportunities in purpose-built and affordable housing segments. The primary risk is 15% tariffs on imported building materials, which could add thousands of dollars to per-unit construction costs and squeeze margins on homes already under contract.

Top 5 Relevant Budget Measures

1. Affordable Housing Partnership Program at $655M over three years -- with $157M in 2025-26 ramping to $293M in 2027-28. This program supports the creation of new affordable and attainable housing through partnerships with private and non-profit builders.

2. Alberta Social Housing Corporation total housing programs at $767M over three years -- including the Affordable Housing Strategy at $113M, Indigenous Housing Capital Program at $92M, and capital maintenance at $130M. ASHC operating programs are budgeted at $343M in 2025-26.

Continuing Care Capital Program at $649M over three years -- $178M in 2025-26 rising to $271M in 2027-28. Purpose-built continuing care and seniors living facilities represent a growing segment of residential construction driven by demographic demand.

8% personal income tax bracket effective January 1, 2025 -- saving individuals up to $750 per year on the first $60,000 of income. The $1.2B annual tax cut improves household disposable income, marginally improving homebuyer affordability and mortgage qualification.

Population growth continuing at 2.5% -- while down from 4.4%, the province adds approximately 125,000 people per year to a population of 5 million. This sustained growth underpins baseline housing demand even as the pace moderates.

Risks

Tariff-driven material cost inflation. A 15% tariff on imported construction materials including lumber, hardware, fixtures, appliances, and mechanical systems directly increases the per-unit cost of new homes. For a $500,000 home with 25% of material costs exposed to tariffs, this could add $15,000-$25,000 to construction costs. Canadian retaliatory tariffs on consumer goods add further inflationary pressure.

Demand moderation. Housing starts forecast to decline approximately 14% from 47,800 to 41,000 units reflects both slowing population growth and the lagged impact of previous interest rate increases. Homebuilders with large lot inventories may face carrying cost pressures if absorption slows.

Buyer qualification constraints. Unemployment rising to 7.4% reduces the pool of qualified buyers. While Alberta's real GDP continues to grow at 1.8%, the combination of higher unemployment, tariff-driven inflation, and economic uncertainty makes buyers more cautious about major purchases.

Interest rate trajectory. The 10-year bond rate forecast at 3.1% suggests mortgage rates will remain higher than the ultra-low levels that drove recent demand. While the Bank of Canada has been cutting rates, tariff-driven inflation could slow the pace of further reductions.

Municipal approval timelines. Despite government investment in municipal infrastructure, the pace of lot approvals, servicing, and permitting varies significantly across municipalities. Delays in development approvals constrain supply response to demand.

Opportunities

Affordable housing partnerships. The $655M Affordable Housing Partnership Program creates direct opportunities for homebuilders to participate in public-private developments. Builders who can deliver attainable housing at cost-efficient price points are well-positioned for this growing program.

Seniors and continuing care construction. The $649M Continuing Care Capital Program plus $150M Seniors Lodge Modernization represent a significant pipeline of purpose-built residential construction. As Alberta's senior population grows, this segment offers diversification from market-rate housing.

Tax-driven affordability improvement. The $750 per person tax cut, combined with Alberta's advantages of no PST and lowest overall tax burden, continues to attract interprovincial migration. Families from Ontario and British Columbia comparing after-tax income and housing costs find Alberta compelling.

Municipal infrastructure support. The $7.5B in municipal infrastructure support, including $2.49B through the Local Government Fiscal Framework and $840M through the Canada Community-Building Fund, helps municipalities service new development areas, reducing delays for homebuilders.

Continuing supply-demand imbalance. Despite increased housing starts in recent years, Alberta's ratio of housing stock to household formation remains tight. The level of dwelling units under construction will provide ongoing supply, and the government notes Alberta will maintain a healthy level of construction activity.

Likely Government Intent

The government views housing as a key affordability measure and a visible indicator of managing population growth. The scale of ASHC investment and the Affordable Housing Partnership Program signal commitment to expanding housing supply, particularly for lower-income and seniors populations. The 8% tax bracket is partially framed as an affordability response that indirectly supports housing demand. The government is also conscious that residential construction is a major employer and economic driver, which is why the capital plan maintains strong housing investment even during a deficit year.

Immediate Questions to Ask Ministries

1. Seniors, Community and Social Services: What are the procurement criteria and timelines for the Affordable Housing Partnership Program, and how can private homebuilders participate?

2. Municipal Affairs: Will LGFF funding allocations specifically support servicing of new residential development areas, and what requirements apply to municipalities receiving these grants?

3. Infrastructure: What standardized designs or approved building systems will be used for SCAP modular classroom and continuing care facility construction?

4. Treasury Board and Finance: Is the government considering any tariff mitigation measures specific to construction materials, such as tariff rebates or domestic sourcing incentives?

48-Hour Action Checklist

• Model tariff impact on current project unit economics with updated material cost assumptions
• Review forward sales contracts for cost escalation or force majeure provisions
• Assess lot inventory carrying costs against revised absorption timeline
• Contact Seniors, Community and Social Services for Affordable Housing Partnership information
• Brief sales teams on budget implications for buyer confidence and affordability messaging
• Review workforce plan against moderating housing starts forecast
• Identify continuing care and seniors housing tender opportunities

30-Day Monitoring Checklist

• Track monthly housing starts data and building permit statistics for Alberta
• Monitor tariff implementation on specific building material categories
• Engage with municipalities on development approval pipeline and lot servicing timelines
• Review Affordable Housing Partnership Program procurement announcements
• Follow mortgage rate trends and Bank of Canada rate decisions
• Assess competitor activity and pricing in major Alberta markets
• Monitor population growth data and interprovincial migration statistics

Suggested Message Frames

Frame 1 -- Housing for Growth: Alberta continues to attract families from across Canada seeking affordable, high-quality living. Homebuilders are meeting this demand by creating new communities with diverse housing options. Budget 2025 investments in infrastructure and housing programs support this essential growth.

Frame 2 -- Affordability Partners: Private homebuilders are natural partners for government affordable housing goals. The Affordable Housing Partnership Program creates opportunities to leverage private sector efficiency and innovation to deliver attainable housing through public-private collaboration.

Frame 3 -- Supply-Side Solutions: The most effective and sustainable way to address housing affordability is to increase supply. Homebuilders need support through reduced regulatory barriers, expedited approvals, competitive material costs, and infrastructure investment that enables new development.

Opposition Narratives to Anticipate

"Homebuilders profit while housing is unaffordable." Counter with data on construction industry margins, the role of land costs and regulatory delays in driving prices, and the employment multiplier effect of residential construction.

"Affordable housing programs subsidize developers." Clarify that partnership programs require builders to deliver units at below-market prices, accept affordability covenants, and meet quality standards. The public benefit is expanded housing supply at lower cost than government-built alternatives.

"Housing starts should be higher to match population growth." Agree that more supply is needed, and advocate for government action on regulatory barriers, municipal approval timelines, and infrastructure investment that enables faster development.

Data Points to Monitor

• Monthly housing starts and building permits data for Alberta
• Tariff rates on lumber, steel, hardware, and building materials
• Mortgage rates and Bank of Canada rate decisions
• Population growth data and interprovincial migration statistics
• Municipal development approval and lot servicing timelines
• Affordable Housing Partnership Program procurement announcements
• Continuing Care Capital Program tender releases
• Construction material price indices
• Employment and unemployment data for construction sector
• Buyer confidence and absorption rate trends in major Alberta markets