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I’d say this is less about reducing CO2 and more about making cities and towns nicer places to live and helping people live healthier lives.
I have no idea what the stats on this are, but I’d guess that the amount of emissions saved in people cycling more vs using a petrol car or electric car wouldn’t actually be much compared to measures that reduce emissions from goods transport.
The article states that 70% of those occupying social housing have their rent payed for by housing benefit. The article also mentions that housing benefit comes from central government.
So the effect of this is a transfer of more money from central government to councils and housing associations. As well as an increase in the incomes of councils and HAs from those 30% that are well-off enough to no longer receive housing benefit but are still living in social housing.