It won't cost a penny, as the public purse won't have to put any money in.
The notional land value of a publicly-owned housing estate is a different matter, and in many ways is irrelevant - unless the council intends to monetise/realise the 'value' of that site at some point. And even if they did, they'd have to spend the income replacing the units lost.
In short - this is the council turning down what at first glance appears to be a good deal from a number of angles.