I agree it would be A because It definitely cannot stand for Carla because it has no gender while Carla is singular feminine.
It cannot stand for her for the same reason that it cannot stand for Carla.
We can try house and work .
Let us try work and put it in the clause.
"Although work was old and needed a lot of work..."
(makes no sense)
Let us try house and put it in the clause.
"Although house was old and needed a lot of work..."
(hmmm. has more sense)
The second clause "Carla knew this was the house for her" reinforces that substitution.
