They are not unrelated. An older married couple with two kids out of the house may not need or even want all the space anymore. The question is the practicality of downsizing. If it were easier and more economical to downsize and shift to living on more of a fixed income more houses would come on the market.
So it addresses the supply side of the equation.
The availabiity of housing has less to do with older folks not moving out of the home they have paid off than it is of not enough new, additional homes being built. If not enough additional homes are being built, the market remains too tight even for the older folks wanting to “downsize”. If the new housing supply is growing enough, then whether younger first time buyers or older “downsizing” buyers, its a better housing market.