The government keeps tabs on real estate deals and makes an estimate on the value of the unimproved land. Or for an extreme case, the government can buy some ol

The government keeps tabs on real estate deals and makes an estimate on the value of the unimproved land. Or for an extreme case, the government can buy some old property, demolish whatever building is left standing there, and the sell the lot to the highest bidder, giving a benchmark for land values in the area.