Moreover, these assessments are likely to be inefficient due to the difficulty in estimating a resident's use of a municipal service. New residents may use municipal services more or less than the actual cost of the fees, which are typically estimated by complex formulas or based on land valuations. The authors cite an example of a senior citizens' center that was charged impact fees for city services and infrastructure that they would mostly likely underutilize. In this case, Baden and Coursey suggest that municipalities may be more efficient in allocating the costs of these services based on quantity of services used, rather than on a universal formula. The inherent ambiguity of impact fees suggests several important issues for housing development policy.
Impact fees have significant influences on the racial and class composition of neighborhoods.
Therefore, impact fees are more likely to push moderate-income homebuyers out of the market than more affluent buyers. Further, to the extent that income is correlated with race, impact fees may create barriers to the migration of minorities into the suburbs. The model incorporates sales prices, housing characteristics, suburb features, and the amount of fees. The model posits that the sale price of a new house is a function of housing characteristics and the impact fee structure. This approach has been used in previous empirical investigations of the effect of impact fees.