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It's the land underneath that appreciates, not the structure of the house on top of the land.

Right, so there needs to be incentive structure to force property owners to make the most of the land. If the house is old and crappy, then taxes should force them replace the building with something more useful/more dense in order to offset taxes.

One way to do this is to modify property tax into a Land Value Tax that's only accessed against land values, rather than land + buildings. This means property owners aren't "punished" for improving their buildings or building larger ones.

But this can also be achieved in current property tax regimes by upzoning to allow more density. This will raise the value of the land (because it's now possible to build more density on it), which once reassessed, will also raise the property taxes.

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