"There aren't many levers we or the Government can pull in some of these areas, other than working with the industry to support it as it comes to conclusions about what it needs to do," Sherwin said.
Little could be done about those characteristics of the market which reflected consumer preferences or New Zealand's smallness.
Some of the larger firms argued that with economies of scale through standardisation and a modular approach, they could reduce construction costs 20 to 30 per cent, he said.
But developers had told the commission there were very few opportunities for large-scale projects - with the rebuilding of Christchurch a possible exception.
On skill shortages, the commission noted that the construction sector's cycle tended to swing around more than the underlying economic cycle, making continuity of employment difficult and incentives to train and to be trained erratic.
It counsels against any attempt by the Government to run its procurement of construction in a counter-cyclical way, preferring transparency about its future needs.
Submitters had told the commission that pathways into and within the industry were unclear and it was hard for young people to get good information about training and career options.
The commission suggests the status quo has the balance wrong between productivity-enhancing innovation and the uptake of new materials and techniques on one hand and prudent regulation on the other.
The leaky homes problem had understandably injected a lot of risk aversion into the regulatory framework, Sherwin said.
"But stopping or impeding innovation is very expensive in the long term as well."
It was important to improve the "feedback loop" so lessons from those who tried new things was swiftly and widely disseminated within the sector and reflected in regulatory practice.
The commission concluded that the Building and Construction Sector Productivity Partnership could implement initiatives to improve skill and innovation rates in the industry. It sees no need to change the tax regime, arguing housing is less tax-privileged than it is often made out to be.