The problem with your argument is that you are conflating the artificial scarcity aspect of this type of regime with the public interest regulation side of thin

The problem with your argument is that you are conflating the artificial scarcity aspect of this type of regime with the public interest regulation side of things. It is possible to regulate for safety (with criminal penalties for breach of regulation, or possibly a bond which can be forfeited to the city, although the latter creates a barrier to entry and probably isn't a good approach) without creating artificial scarcity. Commercial zoning regulations are quite different, because they relate to land, which is a naturally scarce resource; the scarcity is not created artificially by the government to keep the supply down and prop up special interest groups by keeping competitors out of the market.