I think you may have boiled the problem down to its essence. Search for Japanese vs. US zoning laws to see the two extremes. European countries tend to be somewhere in the middle. Same pattern can be observed with restaurant sizes and their variety.

Yep, it's this. Zoning laws in US urban centers are an absolute nightmare to navigate. If you have the time (and the gall) consider looking up the zoning laws that exist across what a normal person would consider "Los Angeles".

Do you live in some kind of dictatorship? In a democracy there are tools how a community makes it allowed.

In reality, democracy can be commandeered by well-organized groups of people that vote as a bloc. At the local level, this means that well-connected homeowner associations wield the power to ban density and commercial activity near where they live.

The oft-cited counterexample to US restrictive zoning, Japan's permissive zoning, works because in Japan zoning type is decided at the national level and there are only 12 types of zoning that define maximum nuisance (so a blacklist). US zoning gets extremely nitty-gritty and is functionally a whitelist.

Yes. It's rules by the God Emperor Money II.