Instanced housing or plots like Roccandil suggested would certainly be an option. And I agree too that the current look of the plot housing areas leaves much to be desired.
Another option could be that when your payment comes due you are sent a notice, in game and your registered email, and you get a grace period to bring your taxes up to date. After that, another notice is sent and your property becomes barricaded off and the player can't enter for another period of time till the taxes are payed. If after those extended grace periods and several notices being sent the property could be bulldozed and go back to a blank plot. Real world property dynamics are similar and can actually take several years to go through the whole process. Seizing someone's property is not taken lightly. The only difference is that the property and belongings therein might be auctioned to offset the outstanding tax debt.
I would however make two additions since this is a game and not reality. At the point the property was to be destroyed, a copy of the plot in all features would be saved. If that player came back at a later date and wanted to resume playing, they could simply buy another plot and throw down the "copy" of their old buildings and stations and they would appear on the new land as they were on the old land without having to go through the tedium of gathering and building again unless they choose to. The second thing I would add is that any property in chests would also be saved. These items could be accessible separately such as at a storage chest at a main city specifically for "seized" items, or just reappear if the copy of the plot was thrown down on new land in the new chests. The goal is to make it easy for a player to return to playing the game and not penalize them because real life got in the way.
The question I would have though, is it necessary to free up land used by people that have left the game? Having a ghost town of empty plots is not appealing and lends itself to an empty and boring feeling. I suppose if there are truly tons of players maybe clearing old structures might be necessary. With the numbers of players I have seen in this current test I wouldn't bet that upon full launch there will be masses of players, but time will tell.