.NET Live Share issue: Agent terminated with exit code: 0 and signal null: A fatal error occurred. The required library hostfxr.dll could not be found

Question

I am trying to use the VSCode Live Share extension from Microsoft, but everytime it tries to start this error is thrown:

[2022-01-26 21:23:06.492] [exthost] [error] Error: Agent terminated with exit code: 0 and signal null: 
A fatal error occurred. The required library hostfxr.dll could not be found.
If this is a self-contained application, that library should exist in [c:\Users\Leonardo\.vscode\extensions\ms-vsliveshare.vsliveshare-1.0.5273\dotnet_modules\].
If this is a framework-dependent application, install the runtime in the global location [C:\Program Files (x86)\dotnet] or use the DOTNET_ROOT(x86) environment variableto specify the runtime location or register the runtime location in [HKLM\SOFTWARE\dotnet\Setup\InstalledVersions\x86\InstallLocation].The .NET Core runtime can be found at:
  -https://aka.ms/dotnet-core-applaunch?missing_runtime=true&arch=x86&rid=win81-x86
    at ChildProcess.<anonymous> (c:\Users\Leonardo\.vscode\extensions\ms-vsliveshare.vsliveshare-1.0.5273\src\abstractions\node\agent.ts:291:32)
    at ChildProcess.emit (events.js:327:22)
    at maybeClose (internal/child_process.js:1048:16)
    at Socket.<anonymous> (internal/child_process.js:439:11)
    at Socket.emit (events.js:315:20)
    at Pipe.<anonymous> (net.js:673:12)

I have .NET Runtime and SDK installed, also using dotnet into terminal works fine. The DOTNET_ROOT environment variable is set to the same thing as which dotnet returns.

Any ideas on this?