Islington Council has announced it will use its pension fund to increase its supply of social housing.
The authority plans to put £150 million towards building hundreds of new properties, Inside Housing reports.
A spokesperson for Islington Council stated that not all the homes will be located in Islington itself, as this could "concentrate risk too much from an investment perspective".
Instead, it is keen to set up a social housing fund encompassing all of London, to which tenants in Islington could be nominated.
The spokesperson said these homes would be available at social rents as they deliver inflation-linked returns for a long time and offer a low void rate due to demand.
Richard Greening, chair of the pension sub-committee at Islington Council, said recent analyses suggest "these assets can offer good investment returns", as well as help to provide the "investment in homes and jobs that our economy needs".
Consultancy specialist Altair believes this approach is likely to be adopted far more widely in other parts of the country in the future.
Susan Kane, a partner at the body, said she "wouldn't be in the least bit surprised if other councils are looking at this as well".
She noted that property is a "sensible investment for a pension scheme", adding that in light of the "severe" need for housing throughout the capital, it would "make a good deal of sense for others to follow Islington's lead".
Islington Council has also floated the idea of jointly investing pension funds in partnership with other London boroughs, as their pension schemes are collectively worth more than £24 billion.