Using real estate as a store of wealth, like gold, is incredibly toxic for society, because it basically takes money (and in the case of real estate, land) out of the economy to mitigate fiscal risk.
In the middle of a city? If you have someone sitting on land waiting for the price to go up and you threaten them with "not using it," then odds are they'll put a cheap building on it and sell storage space or something. What would that accomplish?
I saw this in action. I wanted to buy an old firehouse for conversion to owner-occupied loft and workspace. Current owner had purchased it in the early 1980's for a few tens of thousands of dollars from the city and the neighborhood had declined-- only half-joking it was the corner of Crack and Stab just down from Needlestick Park. The owner had moved cross-country and left the property and it's value had declined but it was adjacent to a gentrifying neighborhood and a short walk to a city bus stop. When I tracked them down they never responded to calls or letters, the local attorney they had last used had no contact with them, and they had stopped paying taxes. The city finally declared that they would seize and auction it off not because of the back taxes but because the sidewalk was not being cleared of snow and the exterior was unmaintained. Suddenly the absentee owner paid up half his delinquent taxes and let a local guy who repairs cars park vehicles in the bays, etc. Great improvement, now there are beat up cars and junk and the roof has started to collapse but because the sidewalk is clear, it's good.
Politically, it is not solved.
Taxes are at the heart of politics. Without taxes to raise revenue most governments would have no realistic power source.
Property tax, as already implemented many places in the U.S.A., already accomplish the l.v.t. to a lesser degree. And many people have a HUGE problem with it. The argument goes as thus: The government (in the U.S.A) does not have the right to unlawfully take my property. I paid for my property, so it is mine. Thus, the government can't take my property because I did nothing.
Basically, if you are a property owner you must have the resources to pay property tax or you will not be a property owner for long. If you are not a property owner it is getting progressively more difficult to stay in the city limits if you do not have a lease or rent an apartment, effectively making it illegal to be homeless.
If you are homeless, because of the U.S. Patriot Act, it is nearly impossible to get a bank account or a drivers license unless you register with a recognized homeless shelter. I volunteered at a homeless shelter for a few years; they aren't great places to hang around, even if you're desperate. And, get this, in some states if you own an R.V. and live in it legally and full time, you don't have a "physical" address. So guess what, you're homeless. In these states you actually have to lie on your drivers license application in order to get a drivers license or a bank account stating that your personal mailbox (like a post office box but private) is your "physical address". And when you do this (lie about your physical address) you're committing a felony. We're talking about retired people, full-time political consultants chasing campaigns, and people that just like to travel.
Simply remove onerous restrictions on development and you'd see the free market react appropriately.
By and large, land isn't undeveloped because the owners stubbornly refuse to develop it. It's undeveloped because laws make developing it impossible or prohibitively expensive.