Some of these one-story commercial buildings were once two or three-story structures with retail below and residential up top. High property tax rates in the 50s/60s/70s led to owners demolishing the upper levels to save on taxes. These single-level buildings actually do have the foundations to support "extra" levels as a result. Restoring what was lost is probably the most economical way to go about redeveloping these sites. I think the key question here is how many of the city's single-story "taxpayers" were once taller structures. Maybe it 10%, maybe it's 80%. I don't know... do any long-term residents have any input? Perhaps they are, in fact, uncommon, and that's why we don't see many of these sorts of renovations.
As for zoning: Rozzie Square and Centre Street in JP (
the site of another recent 2-story addition) are zoned such that multifamily residential is allowed above the first floor. I'm willing to bet that's the case for a lot of these districts around town.