PTY allocation request failed on channel 0
You may have messed up your environment and specifically under /dev you may have remounted a wrong source point or otherwise killed /dev/pts
The solution is to recreate /dev/pts or fix whatever caused it to be wiped out or broken.
In verbose mode the client may show this:
#verbose client
Authenticated to 172.16.17.2 ([172.16.17.2]:22).
debug1: channel 0: new [client-session]
debug1: Requesting no-more-sessions@openssh.com
debug1: Entering interactive session.
debug1: pledge: network
pty, allocation, solutionpty, dev, remounted, pts, recreate,