I can definitely say that in my current game, the city that was building nothing could have built something when I took it over: Amsterdam has zero buildings...and it's grown from size 2 to size 4 since I took it over. Not even a monument, which must have been available to build when the city was captured.
So it doesn't (only) occur when there's nothing available to build.
This entire time, it's had exactly one hammer, and used it for nothing. I'm playing on Marathon speed, so one hammer is not enough to build a monument in less than 99 turns (it costs 120 hammers), so I think Alia is on to something.
Because, suddenly, it's changed: now Amsterdam is building a monument. What caused the change? Well, firstly, the population has now grown to five. Secondly, the city has been surrounded by Aztec warriors, forcing a citizen into unemployement, and forcing the city to use a previously unused plains farm, it now has 3 production, a monument can finish in 39 turns, and now a monument is being built.
Attached: (note...these are Mac save files, in case that matters)
AmsterdamBroken: in this save, Amsterdam is broken, producing nothing, and has been producing nothing since it was size two...but this is about to change, as the city will grow to size five and be surrounded by Aztecs in just one turn, taking it to two hammers and starting production of a monument.
AmsterdamProducing: in this save, Amsterdam is already surrounded by Aztec units, has more than one hammer, and is now producing a monument.