Use keyup/input event instead of keydown
As in keydown, value of comtenteditable is not updated when user has entered some content in input-element.
Refer onKeyPress Vs. onKeyUp and onKeyDown
$(".FormDescription").keyup(function(event) {
  $(".FormDescriptionPlaceholder").css('display', 'none');
  if ($(".FormDescription").text().length <= 0) {
    $(".FormDescriptionPlaceholder").css('display', 'block');
  }
})
.FormDescription {
  border: 1px solid black;
}
<script src="https://ajax.googleapis.com/ajax/libs/jquery/2.1.1/jquery.min.js"></script>
<div class="FormDescriptionContainer">
  <div class="FormDescriptionPlaceholder">Iam a placeholder</div>
  <p class="FormDescription" contenteditable="true"></p>
</div>
 
 
Issue with keydown, check the current value printed in console,
$(".FormDescription").keydown(function(event) {
  console.log($(".FormDescription").text());
  $(".FormDescriptionPlaceholder").css('display', 'none');
  if ($(".FormDescription").text().length <= 0) {
    $(".FormDescriptionPlaceholder").css('display', 'block');
  }
})
.FormDescription {
  border: 1px solid black;
}
<script src="https://ajax.googleapis.com/ajax/libs/jquery/2.1.1/jquery.min.js"></script>
<div class="FormDescriptionContainer">
  <div class="FormDescriptionPlaceholder">Iam a placeholder</div>
  <p class="FormDescription" contenteditable="true"></p>
</div>
 
 
IMO, going with input event and having keyup as fallback is better approach(considering browser support for input-event)
$(".FormDescription").on('input keyup', function(event) {
  $(".FormDescriptionPlaceholder").css('display', 'none');
  if ($(this).text().length === 0) { //length will never be less than 0
    $(".FormDescriptionPlaceholder").css('display', 'block');
  }
})
.FormDescription {
  border: 1px solid black;
}
<script src="https://ajax.googleapis.com/ajax/libs/jquery/2.1.1/jquery.min.js"></script>
<div class="FormDescriptionContainer">
  <div class="FormDescriptionPlaceholder">Iam a placeholder</div>
  <p class="FormDescription" contenteditable="true"></p>
</div>