Restricting development to maintain a "country feel"?

This article in today's Register is indicative of land use regulations as per usual after the death of Prop 90. Residents want to keep lower income people out of their neighborhood by banning a medium density housing project. They point to the "history" of their neighborhood, and draw parallels to San Juan Capistrano. I'm sure it's just a coincidence that Capistrano is a very affluent area.

Should this sort of thing be allowed? Clearly these owners are upset that their neighborhood didn't wind up being as good an investment as the original settlers of San Juan Capistrano. But if the market will not bear ritzy developments, should they be able to ban the kinds of developments that do make economic sense?