It's easy for us to get together since all of my friends' houses are within two blocks of mine.
C. friends'
Because they are talking about all friends, makes it plural. Add an apostrophe after the s to make it possessive, of the houses.
A. is not right because - friends - is plural, but not possessive.
B. is not right because - friend's - is possessive, but not plural.
Hope this helps.