It's based on population densities. Localities can designate industrial and commercial areas, but can't deviate from federal guidelines to prevent growth.

Instead of single family homes they allow triplexes where a percentage of space can be used for a low-impact business, like a barber shop or something. They have setbacks geared towards making sure that you don't build three stories on top of your neighbor's house.

They have neighborhoods. They don't have a housing shortage. They don't have a system that doesn't empower developers who want to clear-cut cheap land on the outskirts of town and build sprawling anti-social subdivisions of oversized identical houses.

Here's some more information: https://www.youtube.com/watch?v=wfm2xCKOCNk