He'll no longer be the dean of a residential house; it's not as if he's being fired from the University. He's still a department director & is still employed at the school.
That being said, his being on this case may make some students apprehensive to discuss sensitive matters with him. As a dean of an undergraduate house, you're supposed to be there as a support resource & sometimes have to deal with difficult issues. The students who live their have to be comfortable going to their dean with issues & trusting them as an advisor/leader. These students all seem to be both uncomfortable with him as a leader & also stuck in the middle of a lot of chaos, controversy, & general upheaval over the whole thing. They have to be able to function without this getting in the way of their work & just stressing everyone in the house out; from this angle, it seems pretty clear cut to me.
Why would any student feel uncomfortable going to him on a sensitive topic?
Well, for one thing, he took on literally the highest profile sexual assault case in the country while serving as the dean of a house at a university known for an uncomfortable climate of under-reported sexual misconduct, & then he acted like a gigantic asshole about it (e.g., suing somebody who wrote an op-ed) when people brought it up.
So, considering the uncomfortable Harvard climate of under-reported sexual misconduct, it's very reasonably understood how Harvard students might not be comfortable reporting to this guy who's not only representing literally the highest profile sexual assault defendant in the country, but also being a gigantic asshole about it.