> and they decline by raising their declared valuation to match the neighborhood average.

First - this is not in line with the previous posts. What stops me from simply declaring my value is 0 until someone makes an offer and then suddenly it's the right value. Until next year when it's 0 again because that buyer has gone away. If I only have to declare at time of potential sale, the declaration is useless.

Second - having lived in a transitional neighborhood, if your house is valued at the neighborhood average, it will be bought in 30 seconds, sight unseen, usually by a corporation that plans to rehab it (because it was last updated in the 70s) and then rent it forever.

And that second point isn't a hypothetical, it's literally already happening: https://www.cbs46.com/2022/06/03/its-an-everyday-occurrence-...

Basically - money isn't everything, and maximizing utility in a purely capitalistic sense is not a set of values shared by enough people to make this work.

If you limited this to only commercially zoned land, then maybe - but you have a social contract with all those people who bought their houses, and violating that social contract, especially in a way like this, is a recipe for disaster.