While zoning and other regulations can make a residential environment a better place to live, the costs of forcing markets out of shape do increase the costs of housing and the tendency to sprawl. I studied this issue once, and it's a complicated issue with no knee-jerk pat answers. All regulations can involve unintended consequences, which have to be balanced against the potential problems of too little regulation (which should be local).

I think land use regulations need to be used sparingly, with full recognition that you are probably pricing the low end of housing out of the picture in some cases. I live on a peninsula. By nature there's only so much land to go around, and a lot of it is locked up in preserves. God knows the landscape looks pretty from where I live, but for what my house is worth, even in the current market, I could buy a block of homes in a small town in the Midwest. When an old house with a yard is demolished here in the middle of town, it is usually replaced by a rat-house multi-use development that packs about five new homes in its place. Luxury homes with tiny rooms, all the amenities, and no yards.

When I moved here, the lot behind my house was a farmer's field with an old chicken coop on it (most of this place was orchards not all that long ago). Now the field is a load of townhomes, and the fig tree that grew just on the other side of my fence is gone. Down at the end of my street is one really old home and freestanding garage, sitting among the newer duplexes like a ninety-year-old at a rock concert. The old guy living there is really cool, and has a real yard with fruit trees growing all over the place.

Houston is famous for having no real zoning codes, but that's misleading. They do have a lot of land use regulations (including the "minimum lot sizes" TAFKASE mentions) and that's pretty much the same thing, so Houston isn't exactly the "great experiment" some libertarians tout it as.

That all being said, "urban sprawl" is mostly the result of a lot of people who would rather live in a roomy house with a big yard than one of the things I just described. Not the fault of zoning, or the lack thereof, really.