Spending and production are chicken and egg.

"..taxing away rents certainly does not create demand."

Of course it does. It removes economic rent from market prices. When prices come down to the actual cost of production, there is more exchange, more consumption and more wealth. This is the basic idea of Smith and Marx. And this is why Smith called ground rents as ideal tax base.

Labour cannot spend, because they pay from their earnings both taxes and and rent/interest for existing wealth. If they would pay only rents (and rents are collected by tax collector) they could also afford housing, right? And this is achieved simply by cutting off the parasite.