People living in cars isn't so bad if they run on electricity. But having people heating their "homes" with a size-optimized ICE burning gasoline is terrible for air quality. Car engines aren't designed to be heaters.
I had imagined at one point having parking garages constructed for this very purpose to be used as homeless shelters.
Obviously, if you were allowing camping in a regulated fashion, you would want to require motorhomes designed for the purpose of camping. These usually have propane furnaces.
There would be quite a few considerations. I would pretty say that these hypothetically could be worked but in reality those who just didn't want this at all would object and the situation could never happen in modern reality.
I had imagined at one point having parking garages constructed for this very purpose to be used as homeless shelters.