Just curious here, but why are people outraged over this? They clearly violated Google's policy, and there were repercussions. Those rules are there to protect Google; perhaps their only legal recourse to cover themselves after a rule violation is to suspend the account?
And that wouldn't even be as bad as this, because a lease is a far more legally applicable document unlike TOS's which no one reads. Further, at least your violation there is related to your apartment. The TOS being violated here was for a hardware device that isn't the service being disrupted. And the worst part is that the act that was in violation is one that governments want to encourage, to the point that owners are protected from being sued. Since Google can't attack them the ordinary way, they are using their leverage on those users with their other products to prevent them from conducting this act.
This whole thing is terrible in many ways.