I had a similar experience recently and was able to resolve it. After starting the development server using the --auth flag, I was then prompted to follow a link where a single-use password/authentication code would then be generated for input through the terminal. To my frustration, entering the generated code kept failing, and I was getting the same output that you have shown here.
During my trial and error process of trying to connect, I happened to notice that the link being generated for the single-use password/authentication code retrieval had "&access_type=offline" at the end. By changing this to "&access_type=online", I was able to generate a code that the terminal accepted, and the local development server started right up.
Good luck to you. If this doesn't answer your question, I hope you find the answer you're looking for.