Inflation isn’t the U.S. economy culprit. Housing is.

Recently released government data hammered home what we have known for at least a year: A national housing shortage, not broad-based price increases, is driving inflation.

Inflation over the past year was 3.1% — far less than in 2021 but still high enough for the Federal Reserve to keep interest rates elevated. However, unlike the inflation we saw soon after the onset of the pandemic, the more recent bout was overwhelmingly driven by the rising cost of what the Consumer Price Index classifies as “shelter” — including rent actually paid and the estimated rent that could be charged for owner-occupied homes.

Since the start of last year, most prices have risen very slowly or not at all. The price of goods — the tangible things we buy — remained essentially the same, rising just 0.1%. Food inflation, a source of post-pandemic pain for many households, was less than 3%. And other categories of prices actually fell: Household energy prices are down 2.4%, and the price of cars has fallen just over 1%. All told, for everything other than housing, inflation was just 1.5% — low enough that if housing prices had grown at historical rates, the Fed could have declared victory.

But housing costs have not grown at historical rates: The two-year price increase came in hotter than at any point in the past four decades. This lopsided picture tells us a lot about who is most affected by inflation and how it should be addressed.

The outsize role of shelter inflation means that homeowners and renters whose leases haven’t changed are experiencing inflation very differently from those who were more exposed to rising housing costs. Indeed, rising housing costs are a double-edged sword, increasing the wealth of homeowners even as they punish many renters. Since the beginning of 2022, housing wealth has added over $2 trillion to homeowners’ balance sheets.

This trend has important implications across generations. People under 35, with a homeownership rate roughly half that of those of retirement age, are much more likely to suffer from rising housing costs while also missing out on the resulting wealth boom. Retirees, with rising housing wealth and protection from inflation through Social Security and Medicare, are more likely to fare better.

The remedy for housing-fueled inflation is also different from standard responses to broad-based price growth. One might have expected the Fed’s interest rate hikes — which caused mortgage rates to rise with unprecedented speed — to slow down housing prices. But while prospective homebuyers did pull back from the market, residential listings were in free fall during the pandemic and have yet to recover. That means would-be buyers face tight inventories and higher prices.

The only effective long-term answer is of course to build and rehabilitate more housing — a lot more. America’s housing crisis is a big problem that requires an equally big solution, with various estimates putting the nationwide shortfall between 1.5 million and 5.5 million units.