Can public housing programs stimulate local development? We provide evidence from over 50 large-scale housing projects in South Africa using geocoded deeds records, formal and informal building counts, and census data. Comparing completed and uncompleted project areas, we identify a 16% decline in nearby formal house prices with a differences-in-differences design. We also find evidence of informal housing growth nearby projects but few changes in income or employment. We investigate whether public housing projects attract nearby informal housing growth, which in turn acts as a negative externality on formal home prices. Our results provide evidence that public housing may interact with nearby informal housing supply, producing unintended consequences for local development.