Forest area determined from remote sensing-derived land cover maps alone at moderate resolution may not appropriately reflect dynamics of housing development in the forested wildland-urban interface (WUI). We conducted a study to quantify how housing development could affect estimates of forest carbon sequestration (FCS) in northern New England, where the percentage of WUI in relation to total land area is nearly double the national average. We found that housing development in the forested WUI could potentially reduce FCS by at least 4% for the region, ranging from 1.7 to 9.3% at the county level, compared with estimates without considering housing effects. This impact is expected to increase by 40% by 2030, based on predicted future increase in housing density within the study area. The majority of housing effect occurred in the intermix WUI where houses and forests intermingle. County-level differences between the approaches with and without considering housing effects decreased from coastal to inland areas because of a decrease in housing density. More than 99% of the difference on FCS estimation came from the low- and medium-density WUI. Although retaining the forest but allowing housing within it may be a good compromise for many reasons for local or regional planning, our results serve as a reminder that decisions related to such housing developments are not carbon neutral.