Well, clearly people who felt the song was somehow inappropriate (including people representing the YMCA at the time it came out) were homophobic.
Obviously there’s nothing overtly sexual about YMCA. The song is very clearly about telling people to access community resources when they are down and out. I grew up in Southern Ontario years after the song came out. I had no idea that the Village People were named for an area known for its high gay population, or that their outfits were essentially gay fantasy stereotypes.
And yet everyone I knew in highschool thought the song was about guys picking up guys at the Y. The song tripped everyone’s gaydar.
I bet a lot of conservative parents picked up on that same vibe. They didn’t know what it was, but the song made them uncomfortable.