Greetings!
I found a way to make the local multiplayer work. I am on 5.3 and the problem persisted.
I followed this guide but still it would not work, the 2nd controller does not respond:
Now, what I did was the following:
In the thirdpersoncharacter blueprint, after the Event beginPlay
node, the next node I put is a Delay node of 0,1 second. And it worked.
I am not entirely sure why but I think what is happening is that the enhanced input local player subsytem is activating before the other players are created, and thus they receive no mapping context at the time of their creation. With a delay of 0,1 (or any other delay), I think the other players are created first and then given a mapping context.