I live in a municipality that taxes like OP and you don't understand how OP described it. Lets try with easy numbers:

Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.

If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.

2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.

If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.

In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.

"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...