It's a long and detailed backstory, but the executive summary is that you've got a group of lawmakers who were inclined to rubber-stamp the sweetheart deal, so you can't just write a law that allows them discretion on the outcome. The arena plan required a zoning variance that was being granted for this particular project, and so the initiative targeted the exception-granting process for zoning. It was as specific as possible to the arena project, while still being effective and legal.
In any case, it's still possible to build housing on the waterfront -- it's just not possible to get zoning exceptions without public review. I think that's probably a good thing.