Letting "the market" do whatever it wants will only lead to one thing, and that is greedy people scalp up the cheapest land they can find (usually, in quarters where poor people live) and build extremely polluting stuff there. Zoning laws exist to guarantee even the poorest of the poor at least a basic standard of protection - although I do admit that there exist a lot of cases where zoning laws are abused to protect the interest of the elites primarily.

Fun fact: Back in early Roman times and for a long time until the 18th century, that also had a public health aspect - burial sites, slaughterhouses and similar businesses were banned from the inner city and, if there was a river, placed on the downstream end so that the risk of pollution was reduced.