I have thought about this for years. If your land value increases dramatically over a short period of time, _theoretically_ you should be able to use this as an opportunity to take advantage of that increase by constructing more housing or office/retail space.
In reality, individuals and businesses like to make long term plans. This expectation makes it incredibly unreasonable for a recently constructed home, office, or retail space which has an expected useful lifetime of decades. They shouldn't be expected to replace it all only after a few years.
This is why I think a reasonable compromise is to have a type of limited "rent control" for land value tax where it is only allowed to increase by no more than 1 percent more than the rate of inflation. This limit comes into affect when a building is constructed and lasts for the duration of the expected lifetime of the building, perhaps 55 to 65 years. That's at least 2 full depreciation cycles (if you're familiar with that). It resets to market value if the property is sold but the limit is not extended any further into the future.
For anyone who think "oh this is just California's Proposition 13 but with a time limit"... not exactly. The tax rate in California is 1% of assessed value where assessed value can't grow more than 2% or the rate of inflation (whichever is lower). In this alternative system the base tax rate would be significantly higher. Ideally, high enough to capture the majority of the land's rental value at first. It also sets inflation as a floor while prop 13 has it or 2% as a ceiling.
In reality, individuals and businesses like to make long term plans. This expectation makes it incredibly unreasonable for a recently constructed home, office, or retail space which has an expected useful lifetime of decades. They shouldn't be expected to replace it all only after a few years.
This is why I think a reasonable compromise is to have a type of limited "rent control" for land value tax where it is only allowed to increase by no more than 1 percent more than the rate of inflation. This limit comes into affect when a building is constructed and lasts for the duration of the expected lifetime of the building, perhaps 55 to 65 years. That's at least 2 full depreciation cycles (if you're familiar with that). It resets to market value if the property is sold but the limit is not extended any further into the future.