A temporary scheme to enable private landlords to receive direct housing benefit payments in return for dropping rents has been a success, welfare reform minister Lord Freud has said.

Ministers temporarily extended the discretion of local authorities to make direct payments to landlords last April when caps to the Local Housing Allowance  (LHA) came in ensuring rates wouldn't exceed £250 for a one bedroom property and £400 for a four bedroom property.

In return, private landlords had to lower their rents to "affordable levels" – aimed at allowing more claimants to secure new tenancies or to stay in their existing homes..

Speaking at the National Landlords Association (NLA) annual conference in Warwickshire last week, Lord Freud said the measure has been very successful.

He said: "...the temporary scheme to enable landlords to receive direct payments in return for a reduction in rent has been very successful. In London alone, a third of claimants who tried to re-negotiate their rent received a rent cut. This arrangement will stay in place for housing benefit claimants, prior to the move to Universal Credit."

Back in January, Prime Minister David Cameron highlighted the measure as being partly responsible for driving down rents in the private sector. He told MPs at Prime Minister's Questions that housing benefit reform had brought rent levels down.

A Downing Street spokesperson said: "We are hearing of cases where in return for direct payments to landlords our reforms are beginning to work."

In his address, Lord Freud congratulated private sector landlords for the "important role they have played in the economy as a whole".

He said: "You have been of huge value during these recent turbulent times. Taking over 590,000 extra tenants on housing benefit, an increase of over 50% – for which we are extremely grateful."

He also pointed to an independent study - carried out earlier this year by the Centre for Regional Economic and Social Research (CRESR) at Sheffield Hallam University - to demonstrate that the "many scare stories about the negative effects of housing benefit reform are simply not materialising".

He said: "Very few claimants (only 2 per cent) reported having to move due to eviction or because their landlord was no longer letting to housing benefit tenants. Of those who have moved – few claimants gave finance-related reasons for the move from their previous accommodation and hardly any mentioned cuts in benefit. 34 per cent of London claimants chose to look for a job to make up a housing shortfall. And nationally the majority of landlords, 77 per cent, said they intend to continue letting to housing benefit tenants.”

He added: "There has been no mass exodus of people moving out of city centres or of wide-spread homelessness because of our housing reforms.

"Overall claimants are making the right choices, to either make up the shortfall – perhaps by taking a job or working more hours – or choosing to move having recognised that they are living in an area which they could never afford if they were working and not claiming benefits."