As a matter of fact I did have that exact same problem. I didn't realize it right away, because I seldom ssh into this box. When I noticed, I recompiled it and it worked after that. I don't follow the BLFS procedure and compiled openssh as one of the first things after getting LFS booting. I think it's because I didn't use --with-md5-passwords. I don't use PAM (hate it).
I compiled mine like this (change yours to --with-pam):
Code:
./configure --prefix=/usr --sysconfdir=/etc/ssh --with-md5-passwords --without-pam --with-privsep-user=sshd --with-privsep-path=/var/lib/sshd --with-libedit
You did remember to create the user and group, sshd?
P.S. It could have also been the version of openssh that didn't compile right. When I recompiled it, there was a newer one, openssh 8.2p1 and I used that.