Consider the different ways the bin lorry will empty different types of property. A block of flats might send their waste down a chute into a bulk bin, the lorry will lift the whole lot up in one go - job done. On a terrace the bin men will empty half a dozen to a dozen bins before the lorry needs to move forward. In a really low-density area (think American-style suburbs with massive gardens etc.) they might only be able to empty one or two bins before moving the lorry forward to the next property. Incidentally I love the way that some Dutch cities now handle bin collections, no need to have four (or more)bins cluttering up the street outside every single house:
Then look at provision of infrastructure and utilities (I know that many of these are not council provided, but the same principle applies to standing charges). The further apart the houses are, the longer the road, water pipes, electricity cables and phone lines must be.
Transport costs more in less densely populated areas. Dense areas can easily support bus services without need for subsidy. You are more likely to walk or cycle to amenities. In a sprawling suburb on the other hand you'd probably have a car or two which wears out the road.
Social care too. In a high-density area a home help worker could walk or cycle between clients as they won't be far apart at all. With low-density development they'll need to drive (which costs money) and it'll take longer (time is money).
Educating kids is cheaper in high-density areas too, low density areas tend to require the council to lay on buses for the kids to get to school. You get economies of scale with a three form entry primary school compared with a single form or even a village school with only 50 pupils.
For this reason, I'd be charging council tax (at least partly) on the physical footprint the property occupies. Not on some semi-arbitary valuation from the '90s but a proper physical measurement. If you want to live in a sprawling detached house with massive garden then you can pay the extra. Obviously agricultural land and woodland would be exempt.