The winning bid for a house is from someone who can afford to pay $1000/mo, and there are no property taxes. The house sells at whatever mortgage $1000/mo buys.

The winning bid for a house is from someone who can afford to pay $1000/mo, and there are no property taxes. The house sells at whatever mortgage $1000/mo buys. Now, add $200/mo of property taxes. The winning bidder now pays whatever mortgage $800/mo buys, since there's nobody who wants to pay $1001/mo overall for it (otherwise they'd have won the other bid). Taxes on the unimproved value of land are pretty much equivalent to seizing ground rents. That doesn't really make things more expensive.