Alberta Budget 2025: Real Estate Industry Group Stakeholder Brief

Executive Summary

Alberta Budget 2025 presents a mixed outlook for the real estate sector. Housing starts are forecast to moderate to approximately 41,000 units from 47,800 in 2024, reflecting a market cooling after the population surge-driven construction boom. The government invests $655 million over three years in the Affordable Housing Partnership Program (an increase of $250 million from Budget 2024) and $150 million in Seniors Lodge Modernization. However, education property taxes are increasing after being frozen in 2024-25, U.S. tariffs on construction materials raise building costs, and the unemployment rate rising to 7.4% could dampen housing demand. Lower interest rates (10-year at 3.10%) and population growth (2.5%) provide offsetting support for housing demand fundamentals.

Top 5 Relevant Budget Measures

1. Affordable Housing Partnership Program: $655 million over three years -- An increase of $250 million from Budget 2024, this capital grant program supports the goal of creating 13,000 affordable housing units. Funding ramps from $157 million in 2025-26 to $204 million and $293 million in subsequent years. This is the government's primary private-sector housing development vehicle.

2. Education Property Tax Increases -- After being frozen in 2024-25, education property tax rates rise to $2.72 per $1,000 of equalized assessment for residential/farmland properties and $4.00 per $1,000 for non-residential properties. The government intends EPT to cover one-third of education operating expense, reaching 31.6% in 2025-26.

Housing Starts Forecast: ~41,000 units -- The fiscal plan projects housing starts moderating further, averaging about 41,000 units over the forecast period. This reflects increased housing supply relative to household growth, easing the supply-demand imbalance that drove the 2023-2024 construction surge.

Continuing Care Capital Program: $649 million over three years -- Combined with other seniors housing investments including the Seniors Lodge Modernization Program ($150 million), Bethany Continuing Care Centre ($57 million), and Good Samaritan Society ($63 million), this creates a substantial seniors housing development pipeline.

ASHC Total Expense: growing to $781 million by 2027-28 -- Alberta Social Housing Corporation provides both operating and capital housing support, serving more than 110,000 Albertans in 60,746 households. Capital grants grow from $476 million in 2025-26 to $701 million in 2027-28.

Risks

Education property tax increases represent a direct cost increase for property owners. The move from frozen rates to $2.72 per $1,000 for residential and $4.00 per $1,000 for non-residential assessment will flow through to property operating costs, affecting both owners and tenants. For commercial real estate, the $4.00 rate on non-residential properties is particularly significant. The government's stated intention to increase EPT to cover one-third of education operating expense means continued upward pressure in 2026-27 ($3.4 billion) and 2027-28 ($3.6 billion).

U.S. tariffs on construction materials directly affect building costs. With 25% tariffs on steel and aluminum already announced federally, and the provincial budget assuming 15% tariffs on all goods, lumber, steel, drywall, and other materials sourced from or priced in U.S. dollars face cost escalation. For a market already experiencing cooling demand, higher construction costs compress developer margins and may delay project starts.

The housing market moderation from 47,800 to approximately 41,000 starts reflects a transition from acute shortage to more balanced supply. While healthy from a market stability perspective, this deceleration means reduced transaction volumes, construction employment, and ancillary services demand for real estate industry participants.

Rising unemployment at 7.4% could weaken housing demand by reducing the pool of qualified mortgage borrowers and dampening household formation rates. Combined with tariff uncertainty, some potential buyers may defer purchase decisions.

The land titles registration levy is projected to increase significantly in 2025-26, adding to transaction costs that affect both residential and commercial real estate markets.

Opportunities

The $655 million Affordable Housing Partnership Program is the largest direct development opportunity. With $250 million more than Budget 2024 and a goal of 13,000 affordable housing units, this program creates significant partnerships between government and private developers. The ramp-up profile ($157 million, $204 million, $293 million) means the largest investment occurs in 2027-28, giving developers time to plan and prepare projects.

Population growth at 2.5% sustains fundamental housing demand. Even with moderation in starts, the underlying demand from continued interprovincial migration and natural population increase supports the housing market. Alberta's relative affordability compared to British Columbia and Ontario continues to attract residents.

Lower interest rates (3-month at 2.30%, 10-year at 3.10%) improve mortgage affordability and reduce financing costs for developers. The fiscal plan notes that lower interest rates and increased housing supply will ease shelter cost pressures, creating a more balanced market environment.

The continuing care capital pipeline -- $649 million in the Continuing Care Capital Program, $150 million for Seniors Lodge Modernization, and multiple named facility projects -- creates a specialized development and construction opportunity. Seniors housing demand is driven by demographics rather than economic cycles, providing counter-cyclical stability.

The $7.5 billion municipal infrastructure support, including $2.5 billion through LGFF, funds the municipal servicing (water, wastewater, roads) that enables new residential and commercial development. Developers should track LGFF-funded infrastructure projects to identify serviced land opportunities.

Likely Government Intent

The government is pursuing a dual housing strategy: market-rate housing supply through maintaining Alberta's competitive tax and regulatory environment, and affordable housing through the ASHC capital grant programs. The government views population growth-driven demand as the primary housing market driver and is investing in affordable housing to address the segment that market-rate development does not serve.

The education property tax increase is explicitly framed as a revenue measure to fund education growth, not as real estate policy. However, the political decision to unfreeze rates and set a one-third coverage target signals that property taxation will be an ongoing revenue tool.

Immediate Questions to Ask Ministries

1. What are the application criteria, timelines, and partnership structures for the Affordable Housing Partnership Program?

2. What is the projected education property tax rate trajectory through 2027-28? Will the one-third education operating expense target create a formulaic rate escalator?

3. How will tariff-driven construction cost increases be factored into affordable housing program budgets? Will per-unit funding be adjusted?

4. What is the Continuing Care Capital Program procurement process for new facility development?

5. How significant is the projected land titles registration levy increase, and is there a cap mechanism?

48-Hour Action Checklist

• Quantify education property tax impact on residential and commercial property operating costs
• Assess tariff impact on construction material costs and update development feasibility models
• Request details on Affordable Housing Partnership Program application process and criteria
• Prepare a statement on the housing market outlook given the budget's economic assumptions
• Review land titles registration levy increase projections and impact on transaction costs

30-Day Monitoring Checklist

• Submit proposals to ASHC for affordable housing development partnerships
• Engage with Municipal Affairs on LGFF-funded municipal servicing that enables new development
• Monitor Continuing Care Capital Program procurement for seniors housing opportunities
• Track interest rate trajectory and mortgage qualification rule impacts
• Coordinate with the construction industry on tariff-driven material cost assessments
• Assess automobile insurance reform for impacts on property and casualty insurance costs
• Monitor monthly housing starts data and building permit volumes

Suggested Message Frames

Frame 1 -- Market Balance: "Alberta's housing market is resilient but cooling. Budget 2025's population growth at 2.5% sustains demand, but tariff-driven construction costs and rising property taxes require careful policy calibration."

Frame 2 -- Partnership Ready: "The $655 million Affordable Housing Partnership Program is the right approach: leveraging private sector development capacity to address housing affordability. The real estate industry is ready to partner."

Frame 3 -- Property Tax Concern: "Rising education property taxes on commercial real estate risk deterring investment. Alberta's low-tax advantage must extend to property taxation, not just income taxes."

Opposition Narratives to Anticipate

Housing affordability advocates will argue that the $655 million falls far short of the affordable housing deficit and that the government should direct more of the $4 billion contingency to housing. Opposition parties may argue the government is allowing housing starts to cool without adequate support measures. Property tax critics will frame the education property tax increase as a broken promise on keeping taxes low. Labour and social advocates will note that the $767 million ASHC three-year investment serves 110,000 existing clients but does little to address the growing waitlist.

Real estate industry groups should acknowledge the affordable housing gap while positioning the private sector as the most efficient delivery vehicle, advocating for increased program funding and streamlined approvals rather than government-built housing.

Data Points to Monitor

• Monthly housing starts data from CMHC for Alberta
• Building permit values and volumes by municipality
• Education property tax rate announcements and assessment updates
• Construction material pricing: lumber, steel, concrete
• Affordable Housing Partnership Program project approvals and construction starts
• Continuing Care Capital Program procurement and construction progress
• Interest rate decisions from Bank of Canada and mortgage rate movements
• Land titles registration levy implementation and transaction cost data
• Population growth and interprovincial migration data