I had the same thing happen to me. I just did a clean install and I would get the error. In Xcode preferences under account, I logged in with my Apple ID and then tried to download it and it worked fine this time. Hopefully this works for you.
I opened xcode with sudo and it was able to be downloaded finally.
This worked! Thank goodness, I have been facing this issue for months and just gave up, using the iOS 9.3 simulator because it was the latest version simulator that would work without this infuriating error.
What's very strange is that if I opened Xcode in non-sudo mode and tried downloading any iOS 10.x simulator, I would have been prompted for my password, supposidly so that Xcode could perform a sudo-like action. But I would still run into this error. This really ought to be fixed, it is not obvious at all for Xcode users to know to launch the app in sudo mode when this error is encountered.