They would create a separated business for each property

I see this loophole brought up a lot. Is there really no way to prevent it?

Taxing businesses which own residential property at the same rate as second homes stops that particular wheeze entirely. If you wish to exempt certain types of business you believe have valid reasons to own residential property at low/no property tax rates then that becomes an exemption they have to demonstrate eligibility for, not the default.

Second homes being misclassified as non-residential property might be trickier to deal with, but a lot of jurisdictions already have laws around what is and isn't residential...