My suggestion would be CG exempt only up to cumulative GDP deflector (excluding implied rents) to sync between capital gains and actual economic improvement over years. You can do reno to a leasehold property, but would you get capital gains for free? Likely not, and not as excessive as freeholds. Why would we justify excessive capital gains when underlying economy is not going up as much? Do we really anticipate land value going up forever and then let the future generations to pay back our stupidity and selfishness like Japan now?
In Japan, the sad reality is land values keep going down, they keep approving build permits, they keep getting cheaper land, they keep building new and expensive homes, and they keep borrowing to buy depreciating properties.
The best solution to me, isn’t about capital gains tax, but community land trust, which makes land public for inclusive community density. Taxing excessive capital gains is just a step to correct our system that allows ALL OF US to build wealth on land appreciation rather than investing in biz that promote wage growth. If we make this first step right, then we can make urban dwellings more comfortable for most, including renters.