The subsidiary, to fall under the Legal & General Capital unit, will be called Legal & General Affordable Homes, and will seek to become 'the leading private affordable housing provider in the UK', the company said in a statement.

The new business will be looking to accelerate and grow the provision of affordable housing across the UK, targeting all areas of the affordable housing market, the company added.

'Despite the fact that the UK is a great place to invest, thirty years of underinvestment have led to poor productivity, low real wage growth and numerous market failures,' said Nigel Wilson, CEO of Legal & General. 'Affordable housing is a classic example of underinvestment with minimal new equity capital being deployed to the sector. This is not a sustainable position - either for the sector or for the 1.3 million households currently on a waiting list.'

The sector has now been added to Legal & General's £15 bn (€17 bn) UK direct investment programme.

Simon Century, head of Affordable Housing, added: 'Many housing associations are becoming increasingly highly leveraged, as they have funded significant amounts of development through debt funding for many years.  They have no ability to raise equity and maintain a sustainable financial structure – therefore forcing many to significantly limit their growth ambitions. Legal & General Capital is building a more natural and sustainable model – one in which institutional investors are the long-term holders of the assets working alongside the best-in-class affordable housing operators who will provide the highest-quality housing management.'