Yeah, it's an awful term, because it refers to hundred-year-old densely-populated urbanized areas that directly abut core cities whose borders were artificially locked into place in the 19th Century, and to greenfield interstate-offramp developments, and just about everything in between.

But, just to address your "way on the other side" scenario: forbidding zoning is exactly what the state should do. You don't get to have democracy for core rights. It doesn't matter if everybody in the neighborhood votes to restrict property rights. They're not up to a vote, just like you can't vote to restrict freedom of speech. It's not subject to a vote.

The right to build housing on my own private property is very clearly, in my view, protected by the U.S. Constitution and restricting that right is plainly a taking. I don't care what Euclid says. It was wrongly decided.