But the market is what set up the restrictions in the first place, in Houston's case! They're just private-sector agreements in contract law that you agree not to do X/Y/Z to your property, in return for your neighbors agreeing to the same.
Is the argument that people shouldn't be able to agree to a contract saying, "I will not subdivide this land, and will only sell it to someone who agrees to the same condition"? I'm not entirely averse to that, but it seems like it's a more complex issue than just allowing whatever the market demands, because there's market demand for these restrictive covenants (people really do sometimes want reciprocal agreements with their neighbors about what each will do with their land), which would have to be prohibited by restricting what kinds of contracts people are allowed to sign.
Just because something is achieved contractually does not mean it doesn't undermine market mechanisms. Cartels are contractual but that still undermines the market.
There is a proposition in the law of property that restraints on the alienation of land are to be avoided whenever possible. restrictions on alienation reduce the fungibility of property and increase transaction costs, reducing efficiency. In some states, e.g. NY, there are limits on what sorts of restrictions on alienation courts will enforce when written into deeds.
Is the argument that people shouldn't be able to agree to a contract saying, "I will not subdivide this land, and will only sell it to someone who agrees to the same condition"? I'm not entirely averse to that, but it seems like it's a more complex issue than just allowing whatever the market demands, because there's market demand for these restrictive covenants (people really do sometimes want reciprocal agreements with their neighbors about what each will do with their land), which would have to be prohibited by restricting what kinds of contracts people are allowed to sign.