Density is a planning policy issue, land tax wont create smaller plots unless policy is changed along with it.
One of the recent developments 5 mins from me, on a brownfield site, has terraces of properties that have no garden at all. They back on to each other. There is no need for rear access to the property as there is no rear garden. So effectively what you have is two rows of terraced houses joined to each other.
Instead of
x_;;_x
x_;;_x
x_;;_x
where x is a house, ;; is an access lane to the rear of the property, and _ is a garden. What they've built here is
xx
xx
xx
And either side of the houses is a public road. Don't even have garages. Parking on street only.
We all said when they were built, "who wants to live in a concrete jungle like this? No front garden, no rear garden, no space for kids to play, all the houses backed on to each other..."
But I bet the developer made a killing
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