It's like laws against prostitution or marijuana -- pointless nanny-stating. Private property rights ought to mean something.
Should someone be allowed to turn their home into a restaurant? A gas station? A concert venue? Should someone be allowed to turn a vacant residential lot into a landfill?
When you buy a home, some of the due diligence you do is to review local zoning. For example, the value of the home might be partially due to it being on a quiet street with ample parking. If your neighbor turns their home into a 24-hour pharmacy, that decision has a huge impact on you.
Zoning laws seem a reasonable way to balance long-term stability and predictability with the free market. If someone prefers the energy and convenience of a mixed commercial/residential zone, cool. If someone else prefers the peace and community of a residential-only neighborhood, that should be an option too.
Operating a B&B out of your private home is not the same as opening a gas station, but it is a commercial enterprise with some of the negative effects.
If you are looking to restrict the rights of property owners, the free market way to it is with a HOA - an agreement owners living within the neighborhood voluntarily enter into.
Also, don't knock mixed-use zoning. I wish I had a few coffee shops in my suburb.
What? An HOA is created by developers at the time of development not retroactively applied on a neighborhood.
Regardless of that if an HOA was voluntary then it has no teeth when parcels are bought and sold. If the HOA passes along with the deed then you've just created a small neighborhood zoning board which is indistinguishable from a small town government and it's not a free market.
Also, Private Property rights would be a regulation on the "free market".