why do you think 'housing will doubtless have better returns'? If that was the case, then there would be zero factories.

If housing already exists in a place there’s probably demand there and existing infrastructure suitable for residential use.

A factory will need access to wider enough roads, a highway/railhead/port, high voltage power lines/gas lines, skilled labor, and so on. A residential area probably isn’t a suitable site along those lines. I’m sure exception exist.

That said I like the idea of max nuisance zoning, as I mentioned.