Why are authors of YA and child books writing books with such controversial content?
A better question would be to ask what makes them controversial according to some in the first place. YA means a young adult, so a teenager to someone in their early twenties. As such, YA books will naturally have content in them which said demographic finds relatable, including, you guessed it, sex (which in turn makes them "controversial)! This is only controversial because a loud group of people wish to be a moral police.
Should they?
Yes.
Why are the publishers encouraging them?
Publishers encourage authors to write books which make them money.
This never used to be a problem because both authors and publishers just knew better than to “go there
This part is just not true. In the US there have been moral outcries over literature targeted for kids or teenagers since mass publishing came into relevancy.
And what happens when said “community standards” are ultimately damaging, such as in this case?