My kitten has hair loss around its bottom, is it a diaper rash?

Yes, this is similar to a diaper rash - where the skin gets irritated by the filth and sometimes infected. The fact that it's not as red anymore is a good sign that it's healing. The hair loss is not too concerning right now, because this will often happen when the old skin and hair grows out after being damaged and new skin and hair is growing in.

I recommend keeping this area clean by just flushing with cool water once a day. Gently wipe away any debris and pat dry after flushing. Avoid scrubbing, or putting any ointments, soaps, or antiseptics on this area, because this can actually irritate the skin and delay healing.

I hope that helps and all is well with the kittens.