Application Password is not enable by default?

If you want to add that single filter, you can do it in your theme’s functions.php file. If you’d prefer to keep it out of the theme, you can make it a simple Must Use Plugin. Make a file like wp-content/mu-plugins/enable-application-passwords.php with this file content:

<?php
/**
 * Plugin Name: Enable Application Passwords
 * Description: A simple plugin that enables application passwords.
 */

add_filter( 'wp_is_application_passwords_available', '__return_true' );

This plugin will load automatically with WordPress.