I think the most elegant way to achieve this is to simply shift the current property tax to fall on land value, rather than land value + building value. That way, people's tax bills don't go up when they improve their house or build on their land. Most people who actually live on that land would see an overall decrease in tax bills because most of their property value (the building) no longer gets taxed, but empty lots and lots with condemned or run-down buildings see their bill go up significantly, forcing them to sell to someone who's actually going to do something with the property.

Combine this with zoning and permitting reform to lower construction costs, and I think that will help the situation a lot.