I agree we need to think hard about tradeoffs of regulation and adjust when the pendulum swings too far in one direction. But I think you can come up with a better example of downsides of overregulation than the Ghost Ship Fire.

To say that people were "forced" to live there due to overregulation is quite a stretch I think. I've known a few creative people in the bay area who lived in similar situations and they all were making an active choice to live in communal housing illegally converted from industrial use. They found it creatively energizing.