It's not illegal becasue he (they) will own the land.
It's not illegal for the Amish to live in their communities so why would it be illegal for Catholics to do the same?
Also what about the private condo and gated communities that have applications for prospective residents? They also specify behavior and other restrictions.
Covenants against selling homes to people because of their race or religion have been illegal for almost 60 years. He could not force his buyers to refuse to sell to non-Catholics.
You have a point about the Amish, but I think that no one but them live there because they live so primitively, Catholics don't live that type of lifestyle where they abhor electricity, etc. I mean, look at how they "finance" themselves. Its not modern and no one wants to move in there, even if they could