And there is a real problem enabling development to occur at scale. But large-scale developments, a la Hobsonville, are essential, the commission argues, to deliver the number of dwellings required and enable the economies of scale to bring costs back within reach of people with modest Kiwi incomes.
It sees land banking as more a symptom than a primary cause of high land prices.
"The effective supply of land in New Zealand is inelastic - it is in practice controlled by local councils through land-use regulation. If those regulations change, such that developable land is no longer scarce and expectations of future increases in land prices are undermined, then much land banking will cease to be a reasonable and rational practice."
The commission offers a range of suggestions about how those rules might usefully be changed.
But that approach is up against the "local political economy" problem - that local government tends to favour incumbent vested interests. Ratepayers, not citizens.
They are the people who turn out and vote. They exercise their (appropriate) rights to object to developments which they see as threatening the value of their largest asset. And they tend to see debt incurred to fund infrastructure as a portent of higher future rates bills.
Growth does not reward councils either financially or politically, commission chairman Murray Sherwin said.
The commission has a touching faith that central Government would stick up for the wider community, the young and the poor, and should have a greater role.
After all, Auckland's housing crisis is a national problem.
The Reserve Bank sees it as a threat to financial stability, hence its interventions by way of loan-to-value ratio curbs, which it acknowledges are only stop-gap measures of limited efficacy.
The housing crisis also imposes fiscal costs via the likes of the accommodation supplement.
And it is a threat to social cohesion, because measures of inequality are much wider after housing costs than they are before.
Home ownership rates are declining and the share of households' disposable income pre-empted by housing costs is climbing.
And by limiting the mobility of labour and the city's capacity to achieve the productivity gains normally associated with agglomeration effects, it retards the country's economic growth.
Hence the Productivity Commission's call for a national agency, an Urban Development Authority, empowered to assemble - if need be through compulsory acquisition - parcels of land big enough for large-scale housing developments and the economies of scale they should afford.
"It would provide a platform for the private sector to invest in expanding its own capacity," Sherwin says.
And it would enable master-planning to build communities.
It is partly about escaping the hobbling effects of a cottage industry structure in the construction sector, dominated by small building firms erecting a few houses a year for the top quartile of the market.
The commission says the assessed value of bare land suitable for subdivision in Auckland almost doubled between 2011 and 2014.
It reckons there are 3600ha of bare land in Auckland suitable for subdivision.
At Hobsonville's density of 18 dwellings a hectare, that would be enough for 65,000 dwellings. But that is only about five years' growth in demand for housing at current rates, to say nothing of the accumulated deficit.
Bare land is held by a very large number of owners rather than concentrated in few hands.
And that gives rise to the potential for hold-out behaviour if the assembly of large parcels for development is left to the market.
So the commission advocates a national Urban Development Authority with powers of compulsory acquisition which would amalgamate parcels of land for development in partnership with the private sector.
It suggests a board appointed by central Government would be better placed to resist local political pressures hostile to development.
Legislative change is likely to be needed. Compulsory acquisition powers under the Public Works Act could probably not be exercised by a Crown entity or company operating at arm's length from ministers, the commission says. Similar powers under the Local Government Act appear to be seldom used, if ever, so their application is uncertain.
"It may be desirable that [compulsory] acquisition only be permitted within areas designated by order-in-council for development or redevelopment. Another [rule] for such compulsory acquisition should be that the compensation is based on the pre-designation value of the land, so as to allow the UDA to capture the uplift in value of the land that results from the designation," the commission's draft report says.
"We don't envisage compulsory purchase of large blocks of land," Sherwin said. "It is much more about potential hold-outs." The mere existence of compulsory purchase powers tends to encourage negotiated transactions.
The commission argues that because an Urban Development Authority would focus on enabling developments on a scale which would not otherwise occur, it would not crowd out private investment.
This proposal will be unpopular with many. Phrases ending in "off" will spring to people's lips.
But the status quo is perilously unsatisfactory. And the Government has to decide whose side it is on: rent-seeking land speculators or Kiwis in need of a decent place to live?
