They mention dollars and social security, so I'm assuming they're from the USA. I can believe it would be illegal in some states to give out water. Georgia for instance made it illegal to handout water bottles.

A 2021 Georgia law does prohibit people from giving water within 150 feet of a polling place, and violators face up to 12 months in jail. Can

You have to realize, the United States has many laws in most jurisdictions that criminalize poverty, and politicians on both sides of the aisle are quickly moving to pass more. It is not a good country to live in. People here get arrested for giving food to the homeless.

It's probably considered stealing like if you were to use a cable splitter to take your neighbor's Internet. Except that's bullshit for a metered water connection so fuck whoever made that law or regulation.

It's also illegal to give water to people in line to vote. it's also illegal to have a water break for workers working outside in the heat.

At least where I live, you get billed separately for the incoming water and drainage. So if I'm not paying the utility, and get water to my property from my neighbor, then I'm not paying for the drainage I'm using when I flush that water down my drain.

Of course the situation is ridiculous, but this is how I'd imagine this being illegal, you are "stealing" the drainage service.

Since OP used American terminology, probably they're claiming America, which would mean you need to ask which state, as water bills and such are a state law thing.

So far as I know there is no state with a law like this, but odds are very good OP never learned the nuances of the situation and something else illegal was going on, like delinquency or fraud on the water bill, or if they were in drought conditions and going over their ration due to supplying a bonus household.

In fact, my first guess is fraud, if this "hose" was connected before the meter, meaning the family was drawing more water than they were paying for.

I could see a utility company or township having some local rule written as something like 'running a hose between houses' being prohibited without any condition of intent to make it easier enforce when people are stealing water, and then using it against someone sharing on purpose because vague rules/laws tend to be twisted to punish people in a way far different than the intent.

Or it could be intentional in the same way as anti-homeless laws where people are just being punished for helping out the poor.

Nowhere.

The water company will do this intentionally when they have water mains to repair. When the street my mother in law lived on had a water main repaired, the water company hooked a hose from her neighbor's house to supply her water. Later they came and hooked her water to the next house down as they worked there way down the street.

But I could still see police doing it because they don't know the law.

As a few have guessed, it could be related to how the sewer usage is accounted for, but that’s unlikely since they are neighboring addresses. It could also be due to local water restrictions but they likely wouldn’t have cut off the water due to a relatively light civil penalty. What few have guessed, it is almost surely a public health restriction to prevent cross contamination and backflow between two serviced addresses.

There are very good reasons why we all want every exit to the public water network to be isolated, which comes with safety inspections and other requirements. As soon as your break down that model of one address serving more than one address, it makes a massive mess of maintaining and inspecting the safety of the water delivery network.