Rising land values don't produce taller buildings when landowners don't feel the pain of rising land values (see: Prop 13).

A very efficient tax is the land value tax: by untaxing the improvements on land and taxing the land values more heavily, you incentivize efficiency.

Raising land values does in fact produce taller buildings. HIgh land value means land is either scarce or very attractive. With high land value it makes more sense to make a two story building on one plot of land rather than a one story building on two plots of land. That's even in the face of NIMBY neighbors since builders must deal with that no matter what.