People all over the world water plants with water that is not potable itself due to bacterial or viral contamination. This is where the old traveler’s adage “Boil it, cook it, peel it, or forget it” comes from.

If the groundwater is not potable because of e.g. arsenic or pesticide contamination, I think that homeowners are usually aware of that and therefore are more likely to use the water only for washing purposes.