The SharePoint Framework generator was updated to version 1.5 on June 5, 2018 and it included breaking changes in the command-line parameters. Thanks to a heroic effort from Eric Shupps and Vesa Juvonen, the Visual Studio Extension has been updated as well.
GitHub release: http://scon.link/vs-spfx-15
VS Marketplace: http://scon.link/vs-spfx-15-mp
There is still some work to do to support the new features in v1.5, but with this release, projects will now generate without error.