Ok, I think I may have clue. You're using lxcfs in version 2.0.4. This
version of lxcfs does not handle uninitialized cpuset hierarchies
which can happen when systemd does not allocate a per-user cgroup in
the cpuset controller. I fixed this in lxcfs 2.0.5 by reimplementing
the cgroup handling code in the pam module that is shipped with it.
I'm not sure whether Stéphane has backported lxcfs 2.0.5 to 16.04. In
case he hasn't, you can grab lxcfs 2.0.5 from our stable ppa:

sudo add-apt-repository ppa:ubuntu-lxc/lxcfs-stable
sudo apt-get update

and then install lxcfs + libpam-cgfs, reboot and you should be good to
go. Please report back whether this worked. If it doesn't, please
attach the same information I requested before again, so I can debug.
:)

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https://bugs.launchpad.net/bugs/1649582

Title:
  lxc-start fails to start a unprivileged container  - cgroup
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