Government under-funding of local public services risks worsening community tension as competition for services increases, an influential group of MPs has said.
The communities and local government committee found migration can have positive impact on communities by filing employment vacancies and increasing diversity.
But it also said the government's failure to properly invest in schools, social care and translation services meant these advantages were often turned into escalating community tension.
"We found that public concerns about the effects of migration are not necessarily based on prejudice, but can arise from genuine anxieties about practical issues, such as the effect of migration on housing and other local services," said committee chairman Dr Phyllis Starkey.
Government planning for the funding of local services is based on old-of-date population data which fails to take into account rapid population change, the committee found. This is fundamentally undermining efforts to allocate funding efficiently.
"Local services are unable to respond to rapid population changes and are left under-funded as a result of the current funding system," Dr Starkey continued.
The committee is calling on a contingency fund to be established to support local areas experiencing inward migration.
It also wants greater accessibility for those who need courses in English and a detailed national evaluation programme on the contribution language courses can make to community cohesion after free English lessons were scrapped by the government.
The Liberal Democrats urged the government to take heed of the committee's advice.
"Ministers need to recognise that people moving between different parts of the UK can have just as significant an impact on a town as migration from abroad," said Lib Dem communities and local government spokesperson Julia Goldworthy.
"Too often this impact is simply ignored by the government."
The Conservatives concentrated on the negative aspects of the MPs' report.
Baroness Warsi, the shadow minister for community cohesion who provoked uproar last year when she urged MPs to listen to British National party (BNP) voters, said the report highlighted the government's failure in controlling immigration.
"This report is yet another indictment of the problems caused both by the government's failure to control the numbers of migrants coming into this country, and by their inability to know where migrants are living and to fund local authorities accordingly," she said.