I haven’t tried this myself, but users can be granted privileges in certain areas:
Go to panel.dreamhost.com, Billing->Account Privileges
Grant Privileges to a new Web ID(at the bottom)
Pick the FTP user (one at a time) and Create a Web ID for that user.
Once that’s done, you can grant the privilege to allow that user access to manage their own user.
Again, I haven’t gone this route for the sole purpose of password management, but I do have one user with their own privileges which includes managing their user account.