To the extent that municipal service improvements increase the utility provided by housing in the area, landlords are able to collect more rent from tenants (not necessarily from the same tenants -- new tenants with more buying power will be more interested in the area after municipal services improve). Since that increase in utility for tenants is derived from the location of a lot rather than what's built on it, the value of the land itself increases while the building remains unchanged. So taxing improvements can't recapture the utility increase the way that taxing land can.