Legal & General has pledged to build 3,000 homes to rent in Bristol, Salford and Walthamstow at the cost of £600m.
The insurance giant has teamed up with Dutch pension fund PGGM, which itself has been investing in build to rent housing for over 40 years.
Paul Stanworth, managing director of Legal & General Capital, said: “The UK rental market, compared to the US and Europe, is dysfunctional, with ever increasing rents and increasingly poor accommodation.
“For this to change, and renting to become more affordable, we need to invest in the ‘new’, and build new homes to rent, and just stop inflating the prices of old housing stock.”
Once the flats are build L&G will be the landlord and use the rental income to pay pensions.