Which is sort of the problem, right? You have an area which is, say, two story buildings, in an area where you really need an average of three story buildings to satisfy local demand.
Implement LVT and everyone gets the bright idea to build twelve story buildings, because why wouldn't they? Three story buildings would have four times the tax per unit.
But then you get the opposite problem. Real estate prices crash, because there are suddenly twelve story buildings going up everywhere and the prices need to fall to the level that building more of them isn't viable even against the tax advantage. Which is well before you're saturated with tall buildings.
But now you have a thousand plots of land and 10% of them have new tall buildings while 90% have existing single family homes. Now the owners of the single family homes are paying a disproportionate amount of the taxes. They abandon their properties, which have already declined in value, because the tax is more than the newly lowered cost of buying space in one of the tall buildings.
The government is now receiving no tax from 90% of the lots because they've been abandoned, so the land tax amount has to increase by ten fold per plot. But that makes it profitable to build 25 story buildings instead of twelve story ones, to amortize the tax over more units, and the cycle repeats.
It seems obvious that this only works if the amount of the land tax isn't large enough to cause these behavioral changes.
