Welfare reform minister Lord Freud told this week’s British Property Federation conference that the social sector enjoyed ‘overprotection’, and that the government’s new universal credit regime would see fewer direct payments to social landlords. This would bring them into line with the private rented sector, he added.

The universal credit, which will combine the majority of benefit payments into one lump sum, will be paid directly to claimants. Social landlords are concerned this will lead to an increase in rent arrears and harm lender confidence.

Lord Freud said: ‘One of the biggest challenges I have is getting social payments into the universal credit without affecting the funding of social housing. I can see a system where social housing has less direct payments – I can’t see why private landlords should be dramatically different from social landlords.’

Brian Johnson, chief executive of housing association Moat, said ending direct payments would increase associations’ business risks. ‘I think we’d all rather housing benefit was paid direct,’ he added.

Direct payments are due be introduced in the Welfare Reform Bill, the publication of which has been postponed until later this month. The delay is partly due to a stand-off between work and pensions secretary Iain Duncan Smith and chancellor George Osborne over a £26,000 cap on the amount of benefits that a workless family can receive.