Henry George wrote about this a hundred years ago in Progress and Poverty! His solution: a tax on land (not buildings) to encourage building up. Economists say it's one of the most efficient taxes possible.
From "Archimedes", by Mark Twain, 1889
You could say that the people really own the land and call it "land rent" instead of "land tax" but mathematically its the same thing.
Essentially, you could say that all land starts out as - and remains - common property (because nobody created it) but a land value tax allows an individual to 'purchase' the exclusive rights to a natural resource by compensating the owners (i.e. everyone else) for their exclusion.
In George's terminology 'land' effectively includes all natural resources. This gives us a good analogy that most people might not consider when thinking about private ownership of land. The radio spectrum. We generally do not allow private ownership of a portion of the radio spectrum but instead ask for payment for exclusive use of the resource for a determined amount of time. To allow ownership in perpetuity based on a one-off payment seems simply wrong in this case. Land, water, etc are similar.
Rent, healthcare, and the price of eggs are very popular things to complain about for some reason...
One advantage of taxing land wealth versus wealth in general (a la Piketty) is that land — "real" property — is much harder to hide in offshore corporate holdings than general wealth. It is all documented by necessity.
I have no expectation, unlike George, that taxes on land could fully satisfy the general fund. But they could certainly play a significant part. A significant difficulty with land value taxes in general is the assessment of land value, which is a difficult problem and has caused controversy in the past due to fluctuations and apparent inconsistencies. My preferred approach in the United States would be a Constitutional Amendment, which would allow centralizing the necessary expertise with the resources of the federal government.
Pragmatically speaking, a land value tax would be rolled out first by replacing property taxes with land value taxes, and the majority of people come out far ahead at this stage because people live on lots that have been developed. It is underdeveloped lots that are losers in this phase.
A true georgist would not stop here though, and they would slowly continue to ramp up land value taxes, but rather than replacing property taxes, they would start lowering other taxes on productive activities such as sales taxes or income taxes. But this would be a slow transition.
Additionally, you would include provisions during this phase where tax payments could be deferred until the sale of the property in order to protect individuals who happened to purchase a home that has dramatically increased in value. This prevents situations where an older person might be forced out of their home due to higher taxes. The goal here would be to transition over the long term and protect people who invested significant amounts into their property. The rates would stay relatively low for quite some time. Having lower rates also solves issues that you mention around accuracy of assessments. If you only tax up to 33% of the rental potential of a property, then you can be off by literally a factor of 3 in an assessment and the land will still be profitable to utilize.
If the value of property is constantly increasing through development, how are you solving the affordability problem? The development is attracting and facilitating activity that drives more demand.
What dense city with a thriving commercial and business/industrial base is cheaper to live in than a less-developed rural small town?
Wrong question; dense cities with thriving economies are more valuable, so they should be more expensive. The question is who collects the rent? Land title holders, or builders and value creators?
Um, any city whose residents want services? Does your rural small town need a plumber? That plumber can offer lower costs if there's a wider, more predictable userbase for him than in the small town.
This applies to any store selling specialist goods, too - if the small town only has a single store, which stocks something that's only bought once a decade, then the buyer pays the cost of the good plus an entire decade's worth of interest. If the city can have a specialist good that sells that stuff one a month, then it'll be cheaper.
Plumbers and other non niche service providers are also generally cheaper in small towns because cost of living is higher for the plumber too, all potential customers have less disposable income, and because the market isn’t perfectly efficient.
Housing and basic necessities like groceries are so much more expensive in thriving dense cities than in rural small towns, that they swamp out any costs for the vast majority of people.
The law is sometimes a large barrier, but there are plenty of places in the world with high housing costs which have minimal regulations.
The problem is the cost of land.
Developers are severely capital constrained. They take massive loans from Banks. Most of those loans go to paying for the land.
Additionally, a large portion of their profits come from the increase in land value that they create from building. Land prices per unit area are higher in a new subdivision than they are in an undeveloped lot(Obviously the majority of the property price increase comes from the building, but the land also increases is my point). It doesn't cost anything to squat on the empty lots while building, so developers purchase multiple undeveloped lots near each other to capture this increase and minimize their purchase cost. Unfortunately, a side effect to this is that the developer basically becomes a monopoly on that area and no other developers or builders can compete with them. This lack of competition is one of the reasons that quality of new build construction has been on decline.
In a world with a land value tax, the acquisition cost of land is significantly lower, but holding it is significantly more expensive. This means that a builder is incentivized to purchase smaller tranches, and hold each lot for less time before starting construction. They will be able to invest more into larger teams because they did not need to loan as much to pay for the land. This will speed up development and also improve efficiency by allowing for more competition.
If you had a massive plot in an urban area, undeveloped, presumably the unimproved portion of your property tax would be quite high! But, the issue is that restrictive zoning means that typically the unimproved value of your tax assessment are pretty low.
For example, if you live on 2 acres, but zoning says that you can only put 1 dwelling unit per 5 acres, then you can't really do much with the remaining acres. As a result, the remaining land has little value, and the tax on it is low. This is especially true in areas of little industry, where the same zoning regulations might also prohibit industrial or agriculture uses on that same plot of land!
This is all to say that the structure you're looking for may already exist, but the issue is still in zoning.
We absolutely need to push for BOTH zoning reform and taxation reform. They will work really well together :)
But these values take into consideration zoning. So if you are ona residential block it is valued as such. But it would not be hard to figure out what it would be worth as high density. So the valuation problem is easily doable.
Also in Australia each state does it independently.
In the US this is typically done at the county level (3000+ individual counties, all doing it independently)
Family just bought 20+ acres, forested, for about $15,000/acre... within 15 minutes of a MSA500k+population's downtown area.