I'm not seeing any major changes in nova between newton and ocata wrt host-model. That's not to say this isn't a bug in nova.

As I noted previously, xenial-ocata is using libvirt 2.5.0 whereas xenial-mitaka and xenial-newton are using libvirt 1.3.1.  This error and the function that it comes from are new since sometime after libvirt 1.3.1: "libvirtError: unsupported configuration: CPU mode 'host-model' for aarch64 kvm domain on aarch64 host is not supported by hypervisor".

This is coming from the following code, pasted from libvirt 2.5.0:

5020 static int
5021 qemuProcessUpdateGuestCPU(virDomainDefPtr def,
5022                           virQEMUCapsPtr qemuCaps,
5023                           virCapsPtr caps,
5024                           unsigned int flags)
5025 {
5026     int ret = -1;
5027     size_t nmodels = 0;
5028     char **models = NULL;
5029 
5030     if (!def->cpu)
5031         return 0;
5032 
5033     /* nothing to do if only topology part of CPU def is used */
5034     if (def->cpu->mode == VIR_CPU_MODE_CUSTOM && !def->cpu->model)
5035         return 0;
5036 
5037     /* Old libvirt added host CPU model to host-model CPUs for migrations,
5038      * while new libvirt just turns host-model into custom mode. We need
5039      * to fix the mode to maintain backward compatibility and to avoid
5040      * the CPU model to be replaced in virCPUUpdate.
5041      */
5042     if (!(flags & VIR_QEMU_PROCESS_START_NEW) &&
5043         ARCH_IS_X86(def->os.arch) &&
5044         def->cpu->mode == VIR_CPU_MODE_HOST_MODEL &&
5045         def->cpu->model) {
5046         def->cpu->mode = VIR_CPU_MODE_CUSTOM;
5047     }
5048 
5049     if (!virQEMUCapsIsCPUModeSupported(qemuCaps, caps, def->virtType,
5050                                        def->cpu->mode)) {
5051         virReportError(VIR_ERR_CONFIG_UNSUPPORTED,
5052                        _("CPU mode '%s' for %s %s domain on %s host is not "
5053                          "supported by hypervisor"),
5054                        virCPUModeTypeToString(def->cpu->mode),
5055                        virArchToString(def->os.arch),
5056                        virDomainVirtTypeToString(def->virtType),
5057                        virArchToString(caps->host.arch));
5058         return -1;
5059     }

This code was introduced by the following commit:

commit 7ce711a30eaf882ccd0217b2528362b563b6d670
Author: Jiri Denemark <email address hidden>
Date:   Wed Jun 22 15:53:48 2016 +0200

    qemu: Update guest CPU def in live XML

    Storing the updated CPU definition in the live domain definition saves
    us from having to update it over and over when we need it. Not to
    mention that we will soon further update the CPU definition according to
    QEMU once it's started.

    A highly wanted side effect of this patch, libvirt will pass all CPU
    features explicitly specified in domain XML to QEMU, even those that are
    already included in the host model.

    This patch should fix the following bugs:
        https://bugzilla.redhat.com/show_bug.cgi?id=1207095
        https://bugzilla.redhat.com/show_bug.cgi?id=1339680
        https://bugzilla.redhat.com/show_bug.cgi?id=1371039
        https://bugzilla.redhat.com/show_bug.cgi?id=1373849
        https://bugzilla.redhat.com/show_bug.cgi?id=1375524
        https://bugzilla.redhat.com/show_bug.cgi?id=1377913

    Signed-off-by: Jiri Denemark <email address hidden>