Allowing rent to mostly accrue to land owners (as in Canada and other democracies) has the same negative effect as not collecting it all, as in the former USSR.
Michael Hudson writes:
The former Soviet Russia and other [communist] economies had NO payment of rent. But they had land. Because Russia did not collect the rent for land it led to inefficiency. Bureaucrats let the "best" flats in a city to Communist Party members in return for favours.
I visited Minsk in 1983. They had a huge, successful tractor factory whose grounds on one side of the city spread from almost the centre to the outskrits. It consisted of a rambling network of workshops and loads of wasted space. I asked the factory manager how much they paid for the site? He answered (through an interpretor) "You have to realise this is a communist economy and the land is free".
His factory was prohibiting other potenial industries and enterprises (such as worker or consumer co-ops) from operating on the most productive sites. Even our trade union-owned hotel was on the outskirts of town close to a forest.
If the manager had had to pay the economic rent for the site then he/she would have contracted the amount of space used, probably to the cheapest land on the outskirts or maybe close to a highway or railhead. But releasing a huge amount of land for other productive purposes. In addition the state would have received a considerable income from land rent from all users especially with new enterprises springing up on favourable available sites.
In the former communist Yugoslavia under Tito, I once read of a dispute between a forestry co-op and the local town about who should pay for a new road. The town council refused to finance it as the forestry co-op would be the main beneficiaries. The co-op refused to pay as they claimed that it was the civic duty of the town council to build roads. As far as I know - the road was never built!
Now if the Communists had not just nationalised land - but also charged the full economic rent how efficient would the Soviet system have become?