Because the value of the two lots combined with existing improvements would be less than the value of two separate lots, one of which is improved.
I work for a local government as an eminent domain appraiser and if the Court had ruled for the landowner, it would be catastrophic for most all local governments as the volume of value lost through land use regulations on the local, state and federal levels would be staggering. I make no judgments here other than the SCOTUS opinion was probably swayed by that fact and lot much by the Constitution.