Diamonds and energy are generating some spinoff benefits in the Northwest Territories, fueling house prices and creating some fertile ground for union organizers.

The Canadian Real Estate Association has credited the industry with stimulating a 21 percent hike in house prices last year to C$246,716, making the far-flung Northwest Territories Canada's second hottest market behind British Columbia's average C$289,107.

A fired-up economy that is currently drawing most of its momentum from the diamond sector has led to a housing crunch in Yellowknife, forcing many residents in the Northwest Territories capital of 18,000 people to live in pre-fab houses trucked in from Alberta. Wood-frame houses built onsite are in such heavy demand that 1,500-square-door bungalows with an attached garage are fetching well beyond C$300,000.

But owning is cheaper than renting, with rents starting at C$1,400 a month for a one-bedroom unit, said Yellowknife Real Estate Board president Ken Pearman.

Major drive by organized labor

Although Northwest Territories residents earn above-average salaries, organized labor is staging a major drive to further improve pay checks.

The giant Public Service Alliance of Canada, with more than 150,000 members, is on the verge of a major breakthrough in negotiating an initial contract for 500 members and Australia's BHP Billiton at the Ekati diamond mine.

The union is also wooing 400 workers at the Diavik mine and hoping to attract non-union employees working for mine contractors.

Despite a lingering mistrust of unions among aboriginals, the Dene Nation has backing from the Canadian government to study how they can join forces with the labor movement.

But aboriginals still carry the scars of more than 20 years ago when an oil pipeline was built from Norman Wells to northern Alberta with workers hired from southern unions rather than the Northwest Territories' communities.

Even fresher are the memories of a violent strike at Yellowknife's Giant Mine, which ended when nine replacement workers were murdered in an underground explosion.

But Public Service Alliance organizer Don Dundar said aboriginals seem ready to give unions a second chance as the pace of mining and energy projects quickens.

Northwest Territories Resources Minister Brendan Bell said in January that because of the limited unemployment among the territories 44,000 residents, it may be necessary to import workers for the diamond industry.

A C$40 million Aboriginal Skills and Employment Partnership, funded by government and industry, will help young northerners get a slice of the employment pie, but there are not enough of them to meet the demands.

However, Bell wants any outsiders joining the labor force to make the Northwest Territories their permanent residence so that the territories can benefit from much-needed payroll taxes.

To that end, he conceded there is a need for action to overcome the housing squeeze.