To add to that, since it happened this friday - it was basically the textbook case for downleveling to a lower tier:
I joined @frogemiah’s T2 table, which was the second session of a multi-session adventure/campaign (I was not able to attend the first session). As they recapped the first session and frogemiah told me about the setting and lore, I recognized the game this was inspired from as one of my favourite JRPGs. I had a VALUE character who was heavily inspired by one of the characters from the very same game and had a strong connection to the main deity/church of that game - which also played an important role in the campaign.
That character would have been a perfect fit, only issue was that she was T3 already (level 16; she originally started out in T1).
Therefore I approached the DM, told her about that and asked if I could level that character down to T2 for this game - which she happily allowed. I set her back down to level 10 and removed any items except for the three she already had back then when she was T2 (two of which were DM rewards).
We had an amazing session; and when the campaign continues, I will most likely continue playing that character in T2.
I also had some T2 characters ready to go, but none of them would have been even remotely close to how well that T3 character fit into the game.
Considering all that, I would be strongly against banning downleveling. It of course should not occur regularly, but in certain situations it is good to have the option.
I don’t think that is too much of an issue, assuming we only allow downleveling with a good reason.
You are limited both by rarity and number of items (although I am in favor of increasing the numeric limits for the new season) and if you go down a tier you of course have to adhere to that tier’s limit. Therefore, as I said, when I downleveled from T3 to T2, I reduced the amount of equipped magic items to 3 (the current T2 limit) and did not use any very rare item.