>The right thing go do is back off the regulation. Let land owners do what they please. If that's a parking space (it almost certainly won't be in the overwhelming majority of cases) so be it.

This is exactly how it is here in Tokyo. People are free to build parking lots (or parking garages even) if they want. But they don't, except in rare cases, because it's far more profitable to build an apartment building or shop or some other building there. Though for apartments, they'll usually build a small parking lot (or garage for a big apartment building) and charge very high rent for residents who want to park their car there, which is a small minority of residents.