A plan to make people financially responsible, by paying their housing benefit directly into their banks rather than to their landlords, risks backfiring, according to social policy experts.

The National Housing Federation, which represents housing associations in England, is warning that up to a million people in social housing will be at risk of falling into debt when the "universal credit" is rolled out next year.

The claim is rejected by the Department for Work and Pensions, which has been conducting pilot projects around the country to ensure that the introduction runs smoothly. The DWP sees the roll-out – which will begin in Manchester and Cheshire in April, and then across the rest of the country from October – as a tool to "nudge" people into work by introducing them to a monthly financial cycle and moving them away from a "benefits culture" mindset.

But a report for the federation by the consultancy, Policis, estimates that 29% of the 3.5 million working-age residents in social housing in the UK – about one million people – risk falling into debt if their benefits are paid to them directly in a single monthly payment. Nine out of 10 social housing residents opt for their benefit to be paid to their landlord, while receiving other benefits weekly or fortnightly, to help them manage their finances.

The Policis report, based on a survey of 2,000 residents in social housing, found that half were not confident that they would be able to maintain their rent payments if they received their rent directly. Eight out of 10 felt it would be more difficult to manage their budgets. The federation warns that many tenants may need to have the credit paid more frequently, with the support for housing costs going straight to their council or housing association. The concerns are echoed by the housing charity Shelter, which has warned that those on very low incomes may make "trade-offs", using social housing payments to settle debts with other lenders who may be more aggressive than their landlords.

The federation warns that if rent arrears were to increase substantially it would damage the income stream of housing associations – and their ability to build affordable homes. "Not providing those who are financially vulnerable with protection will increase their risk of falling into debt, but could also threaten future building of much-needed new affordable homes if it leads to rent arrears increasing," said David Orr, the federation's chief executive.

The government insists that vulnerable people will have their housing benefit paid directly to their landlords, but ministers have yet to confirm a definition of vulnerable. The federation says that the definition should be broad and include people with debt problems as well as health problems. "We have always been clear that the right support must be in place as people move on to universal credit," a DWP spokesman said. "That is why we are running projects around the country with councils and housing associations now to test that support and where additional protection needs to be in place." The minister for welfare reform, Lord Freud, believes that the move will encourage more young people to find work. Single people under 25 currently face a severe withdrawal of benefits when they go into work. But the DWP claims that the credit will change this. "Universal credit will give young people much needed extra help when they get a job – they will be better off in work than on benefits," Freud said.

"Currently the loss of benefits can be a huge barrier for young people wanting to do the right thing and get a job. Universal credit will fix this and help 300,000 people overall into work with the much better financial incentives."