Not to mention, what happens when you get laid off or fired? Ejected from your company town?

Why? A company where one works, rents office space there. You rent an apartment. You can work for another company there, or move elsewhere.

There are contracts. If your contract forbids doubling over night, you are good. If not, it was your choice to agree to it anyway.

What are you going to do, sue them?

Sure, why not? Also, if others see they don't heed contracts, they will start avoiding to do business with them.

What's the problem? Just move elsewhere. You don't own a place there - you can only rent - so you don't lose anything - it will be about as stupid/unworkable as one hotel in a city raking up room prices 2x just because they "try to maximise profit".