>From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.
They can sell the land and move
If you can afford to pay 100% upfront for the cost of doing an addition to your house, then you can almost surely afford the ~1% per year additional taxes. This is technically a 'punishment' but it is a really minor one, and I doubt it actually impacts many people's decisions
My desk is right across the street. Used to see that shack every day before covid.
Can't see to find it on http://www.taxfairnessproject.org though
I'd argue actually charging the owner of the shack $100,000/year in property taxes (~1%) wouldn't have a radically different effect than charging them a 2% land value tax.
Under an LVT, the landowner contributes the same amount to their community regardless of their use of the land -- empty plot, slum, or well maintained building. This is good for the community overall.
So in your example the speculator sitting on an empty plot would see their carrying costs double. How could that not affect their behavior?
Once the property is sold, a developer will find that their profit from constructing a building is roughly proportional to the floor area regardless of whether there is a 1% property tax or not. This is because the profit they earn per-sqft is more than the resulting net present value of future property taxes on it. Therefore they maximize the density as allowed under zoning and we end up with an efficient use of the land.
(Of course dumb zoning laws messes everything up, but that's a whole separate topic...)