The commission, which was set up by the Royal Institute of British Architects (RIBA) said that the homes could be built without costing the government any money if "the dysfunctional way we build homes is radically overhauled”.
Local authorities could secure rental housing developments on behalf of taxpayers by pooling assets.
The report sets out five changes, starting by increasing the number of new homes built in year from the current 100,000 to more than 300,000. It suggests using an independently managed £10bn local housing development fund to initiate the scheme, financed and owned by the largest local authority pension fund.
Future Homes Commission chairman Sir John Banham said: "There is no better time to tackle the UK housing crisis. After a year-long national inquiry, the Future Homes Commission has concluded a housing revolution is entirely possible and will lead economic growth. We need to increase massively the number of quality homes being built for many years to come, but also to develop communities which enhance the quality of life for both new residents and those living in existing communities nearby. All this has to and can happen without any additional Government funding.
"We strongly believe that local government can become the leader of new development once again, by using their assets and powers to create the type of mature, sustainable, mixed tenure communities that Britain needs and that institutional and international investors want to invest in."
Local Government Association chairman Sir Merrick Cockell said: "Councils are very keen to explore the opportunity to use pension funds to drive local economic growth. A few projects are already off the ground but with a bit more support we could put even more of the schemes' billions of pounds in collective assets to work. The LGA has been discussing the potential for unlocking further investment with pension funds to explore the obstacles to this type of investment that exist at present. We have asked the Government to help clear the barriers standing in the way of direct investment in job creating infrastructure projects.
"In addition to pension schemes, there are other avenues through which councils could unlock finance to boost development. Lifting restrictions on local authority borrowing would free councils to build new affordable homes and kick-start job-creating infrastructure projects."