You left out the fact the water will end up in the same place as it does when they wash the car at home, in the streams and oceans, which is what they are bitching about.
Actually, a sizeable portion of the water used to wash the car in the front yard ends up watering the lawn, while the rest goes down the storm sewer (assuming there are storm sewers in that area) and on to the river, lake, ocean, or whatever.
There's nothing uniquely wrong with this water - it just contains a portion of the airborne and road grime that will get washed down into the earth, streams, and oceans when it rains anyway.
This is probably one of those "property value" issues, like bans on outdoor clothslines and that kind of thing. We can't have the peasants looking like peasants now, can we?