According to a new study by the B.C. Government & Service Employees’ Union (BCGEU), there’s a missing element in the region’s housing crisis.

Study co-author and BCGEU treasurer Paul Finch said while foreign capital and its connection to speculation and lack of supply is often discussed, bank lending is also part of the problem.

“It’s why that’s important to understand its effect on rent. Because if you have speculators who are flipping the cost of real estate in the market quite frequently, what’s happening is that they need to break even on the cost of the mortgage loan. And so what’s happening there is that the compound interest on mortgage loans is pushing up rent.”

“It’s domestic bank lending that allows that price change to be felt across the entire market, and it’s really the prime driver of it,” he said.

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The study calls for aggressive land taxes on million dollar homes to curb speculation, legislation to protect renters, and investments into infrastructure and affordable housing.

Finch said people need to shift the way they think, and understand that private interest applied to real estate is effectively a tax that banks get to keep.

“When banks lend out higher amounts of money, it’s to get a higher return from compound interest on a mortgage,” said Finch. “What they’re trying to do is the more prices are bid up, the more speculative activity there is in the market, the higher the real estate loans they give out, the more money they make.”

Finch he said if the government aggressively taxed unused land, it would make it unattractive for speculators.

The Canadian Banking Association has refused to comment.