It isn't a controller issue. That still works through SDL.

Steam Input uses the Steam overlay, it takes your controller input and allows for more custom remapping options, macros, etcetc. I primarily see it being used to let people use a controller to play games that were not designed to play with a controller (by remapping the controller to move the mouse cursor and send keyboard inputs with the controller buttons)

I use Wayland and my xbox controllers work fine. I'd use Steam Input if I could, but most games are already designed to accept controller input directly so the damage is limited.