> the "unused land" specter is imagination

Correct, because there is, effectively, LVT everywhere. That is because the bank can print infinite money to bid up the price of houses until the monthly payment reaches whatever people are willing to pay.

The problem is that it doesn't go to the city, it goes to the bank instead.

If the city would charge LVT, it would take a cut out of "market rate" of monthly payment that people are willing to pay for that land and redirect it to the city. The other side would balance via real estate price decreasing, therefore the loan, and therefore the monthly payment that goes to the bank.