Can I use latter when there is only one option?

You cannot do so and remain grammatical, because latter is a comparative word (it compares one item to another in sequence), and so necessarily requires two options. In your sentence, latter confuses the reader because there is only one thing being compared and the sequence is not apparent.

No, latter doesn't work unless you are referencing the second of two things mentioned.

You could try:

Over successive stages of the model, the urban population evolves to the optimal solution, which is reached when there are negligible changes in the dynamic of each individual.

Or:

Over successive stages of the model, the urban population evolves to the optimal solution—the point at which there are negligible changes in the dynamic of each individual.

(Note that you need a comma after your introductory phrase.)