The direct payment demonstration pilots, in which housing benefit is paid directly to tenants instead of landlords, has been extended by six months by the Department for Work and Pensions (DWP).

The DWP also revealed the rent collection rate for the 6,168 tenants involved in the six pilot areas has increased to 94%, with individual pilots recording rates between 91% and 97%.

Figures released in December 2012 for the first four months of the pilot schemes showed rent collection rates at 92%, with individual pilots collecting between 88% and 97% of rent.

The report also revealed that 1,258 tenants have now had their direct payment of housing benefit reverted back to their landlord after struggling with arrears.

The pilot schemes intend to test the impact of direct payments on tenants and housing providers before the scheme is rolled out as part of the government’s universal credit system, but earlier rent collection figures had alarmed landlords who warned that a significant drop in rent collection would severely hamper their businesses.

Welfare reform minister Lord Freud said the scheme’s extension would help the government better understand the tenant support required for universal credit.

“Direct payments will allow claimants to manage their money far more effectively and create a much smoother transition into work,” he said.

“The demonstration projects show the majority of claimants are managing their own rent – even through Christmas when budgets can be tight.

“But we have always been clear that there needs to be protection for both tenants and landlords if people build up arrears and to target help at those people who should not be placed on direct payments.

“The projects are helping us to develop and set this protection and that is why we are extending them for six months.”

Helen Williams, assistant director of the National Housing Federation, said: “This extension is welcome as the demonstration projects provide vital evidence of the systems that need to be in place before the roll out of universal credit. But the high numbers of residents being switched back to having their housing costs paid direct to landlords, and the ongoing problems landlords are having in collecting rent, remain a big concern.

“DWP should allow residents to choose having the money paid direct to their landlords rather than risk them not being able to manage and getting into arrears.”

This content is brought to you by Guardian Professional