EPA's interests in regulating land use are much more squarely in the police powers carveout than the zoning regulations that limit the number of occupants on a residential parcel.

If EPA says you can't build a dam or otherwise alter the watershed that overlaps your land, they have a clear rationale for that regulation that goes beyond "protecting the charm and character" of a particular neighborhood.

Just overturning the decision that says occupancy density is itself a police power would be narrow enough to ease building restrictions while not blowing the EPA away.