This doesn't add up. If rent is so much higher than purchase plus upkeep, people will borrow money and buy, safe in the knowledge that they can just become a landlord and be cash-flow positive at any time. Or investors will simply buy the cheap properties and rent them. The demand for investment properties will drive up the purchase price and parity will be reached.
This is why house prices are just as insane in Silicon Valley as rents.
He's claiming that a land tax would not be passed on to renters if instituted, because rent is being driven demand-side (what renters are willing to pay) not supply-side (cost to provide a house to people). Any attempt to increase rent would result in a lower demand by renters, meaning the market would fail to clear -- the rent would then need to be re-lowered.
But you are correct, that rent shouldn't be higher than purchase plus upkeep. In the event of a land tax, rent holds constant but upkeep increases (taxes); consequently, for the equation to hold, purchases prices (and thus land values) will fall.
And that's why this is so politically impossible to pass, even though it is considered the "least bad" tax economically. Land owners would see their assets sufficiently fall in value if a land tax were enacted.
No rents typically lag house prices significantly. Prices are set by credit. Rents by wages. You have to pay your rent from your wage. Prices are via fiat created ex nihilo by private banks.
Rents do go up when wages go up (SF) and when there is speculation they rise but it's capped by wages.
How about increasingly higher property tax rates for 2nd, 3rd, etc. properties? Also, getting rid of the CA law that sets property tax assessment value at time of purchase would help increase liquidity a lot, as it no longer makes sense to let land sit unproductively as you wait for it to appreciate.
This is why house prices are just as insane in Silicon Valley as rents.