I can't tell you about the zoning or local market.
I can tell you that the International Building Code would require a fire separation between the garage and the living space. This would require at a minimum 5/8" fire rated sheetrock on the ceiling, and 1/2" sheetrock on all supporting walls.
It would also require 2 exits from the living space, neither of which can exit through a garage. If that building has a separated stairwell directly to the outside it would count as 1 of the exits, but it would have to be entirely covered (walls and ceiling) with a minimum of 5/8" fire rated sheetrock separating it completely from both garages. More likely 2 layers would be required.
Local regs could require a sprinkler system.
Fire regulations don't like sleeping areas over cars with gasoline in them.