Housing benefit payments could be paid direct to private landlords to encourage longer term tenancies and stable rents for families in the private sector, following a Labour party policy review.

Under the coalition government's welfare reforms, housing benefit payments will be paid to tenants under the universal credit system which will begin to be rolled out next year, and marks a significant departure from the current arrangement in which many tenants receiving housing benefits have it paid directly to landlords.

Speaking at the launch of the Institute for Public Policy Research's No place to call home report, shadow planning minister Roberta Blackman-Woods confirmed the Labour party was looking at the issue of direct payment as part of a range of incentives including tax deductions to entice landlords to make a more stable offer to families.

"There is a huge problem about to hit us with universal credit and we are very concerned about the arrival of direct payments and what that might mean for some people in the sector," Blackman-Woods said.

The shadow minster warned that Labour would also look at boosting tenants' rights if landlords did not respond to incentives. "The message to landlords is that we want to work with you and come up with workable incentives," she said. "But if you don't do that then what we might have to look at is giving people rights for longer term tenancies in the private rented sector."

More than 1 million families with children live in the private rented sector, which is characterised by short-term tenancies with tenants vulnerable to rent increases or evictions at short notice.

Shadow housing minister Jack Dromey said: "Families need stability to plan where they send their kids to school and certainty to manage their household budgets. With longer term tenancies and predicable rents, the private rented sector will offer the affordable and stable homes that renters need. Families will feel that their rented house is a home and it will help strengthen communities as people put down roots and get to know their neighbours."

A survey conducted by the Residential Landlords Association found that the vast majority of landlords would be less likely to rent to housing benefit recipients under the new universal credit scheme and have called for direct payment to landlords.

Simon Gordon, consultant to the Residential Landlords Association, said: "The problem at the moment is that landlords are wary of renting to particularly young people that are vulnerable, or let's be blunt who are poor, is because of the government's direct payment policy. There are great concerns both in the social sector and the private rented sector about the impact this is going to have. Landlords need to know they are going to get the rent."