Even though there isn't a lot of free money to be had, that's because a small subset are grabbing the free money, not because everyone is grabbing it. Most don't grab it. Most just don't think about stuff like that and make terrible financial choices. That includes your local restaurant as much as your neighbor.

Thus businesses are efficient to the degree that competition forces them to be efficient. No more. Now in some industries, a few businesses that are really well run are able to take so much marketshare that they became huge megafirms. That happens with tradeables, but much less with restaurants, and much much less with landlords. That is why franchise chains and big property management groups are so successful -- they are so much better run and more professional than the typical small time landlord or family owned restaurant.

Btw, this is really the fatal flaw of communism and other communitarian economic approaches. It's not that the economic calculation problem is too hard -- yes, it's hard but you can get a good enough solution with linear programming approaches. But rather, there was no capital market that would remove capital from inefficient firms and give capital to new rivals. Look at Tesla's market cap and compare to the market cap of GM. In a planned economy, there are no Teslas, there is no force pressuring firms to maximize outputs per quantity of input, or to create products that appeal to people. All of that comes from competition and market pressure. Thus a capitalist economy with all products sold by monopolies devolves into a planned economy. But each house is a little monopoly.

So in those areas that are unconstrained, landlords can be driven out of business to some extent. In constrained areas, they cannot. So many stories of cat ladies sitting on huge mansions, slowly letting the mansions rot. Most of the housing stock in SF has water damage due to landlords not doing basic maintenance to protect their investment. This is because there is no one to drive them out of business.

Now the idea of a property tax is that a high tax rate will force them to put the property into good use or at least sell it to someone else who will. But for that to happen at scale, the tax rates would need to be pretty high - higher than is politically feasible. High enough so that you feel like you are only renting the land from the government, rather than owning it, which really takes away autonomy from all but the very rich.

Thus it will have a positive effect for more efficient land use, but that effect is very small unless those taxes are really high.