A single family home near transit is far more valuable than a single family home away from transit. There’s no reason existing homeowners should capture all of the value of that increase when they’ve paid nothing and done no work to make it happen.
A small amount of cases the owners wont want to sell for those lower prices. So yes its a disincentive but only a minor one.
Yes existing homeowners get benefit without paying for it but the usual argument is we cant tax them as they didnt ask for it and some will not be able to pay. Forcing pensioners out of lifelong homes is not seen well
In broader terms we are always looking for some way to deliver owners rights as well as socialised community outcomes. No system can deliver all but this is as clear a compromise as can be made in the view of most I've seen who have looked into it in detail
Imagine a railway line/station is built 10 mins walk from me.
I'm not interested in the railway line. So I rent out my home and use the proceeds to buy or rent a larger one in a different location without said railway line.
Trying to capture that value I think would result in some sort of weird rent control / rent tax central planning nightmare that would have pretty bad side effects. It'd probably end up looking a bit like California's Prop 13(?) where people just stay put.
Personally I don't want to live in a society in which homeownership is not possible. I could get behind an LVT on holiday homes, second parcels of land, etc. I wouldn't like it, but I can see why it may be needed.
But a primary residence being subject to an annual tax which can change and outstrip the ability of the owner to pay just means that there's no meaningful way to build stability. I think that's a pretty awful side effect of a flat LVT on everything; I'm invested in my neighbourhood and improving it based on the fact that it's actually mine for life (rather than being temporarily mine).