The Postal Service appears to be broke. But, actually, it’s rich in real estate

At a moment when the post office is most needed, its future is murkier than ever. With millions of Americans currently dependent on the United States Postal Service for essential products like medicine as a result of the coronavirus, we still need a universal and affordable delivery safety net.

But with costs rising and mail revenue collapsing, the future of the agency is in question. Could the USPS’ massive real-estate holdings provide a path toward financial sustainability?

At least on paper, the coronavirus crisis should have been a boon for the USPS’ business, with packages going out in droves. Nationwide quarantine orders have sent stock prices surging for businesses like Blue Apron, which mails customers recipe materials and instructions, while online retailers are scrambling to keep up with explosive demand. The typical apartment mailroom looks like a miniature warehouse.

But in reality, the agency faces grave new financial challenges, above and beyond the perilous financial conditions it already faced. Costs have risen while overall regular mail volumes have collapsed, despite all those packages.

In response, the USPS has requested a taxpayer bailout that would include $25 billion to navigate the current crisis, $25 billion in loans to keep operations afloat and $25 billion for unmet capital needs, including $11 billion for a fleet of new mail trucks and $14 billion to spruce up all those under-maintained retail storefronts and distribution centers.

Yet the Postal Service’s greatest asset — its realestate portfolio — largely has gone undiscussed.

Most post offices are leased, but the USPS still owns more than 8,400 facilities, ranging from hole-inthe-wall post offices to massive sorting centers. Altogether, its portfolio encompasses nearly 200 million square feet of interior space and

900 million square feet of land.

Many of these properties occupy prominent locations in some of the country’s most lucrative real-estate markets. Yet USPS facilities often sit squat and surrounded by surface parking lots, a product of onerous agency minimum parking requirements, even where most people get around by foot, cab or public transportation. To the extent that the USPS could encourage the more productive use of its valuable real estate — such as by allowing new residential buildings to rise above brand-new ground-floor USPS facilities — the agency may be sitting on an untapped gold mine.

Take a stroll around Manhattan’s hottest rental markets, and a USPS facility will stick out like a sore thumb. Mere blocks from Times Square, for instance, a drab USPS facility rises only four stories along glitzy 42nd Street.

Local governments have limited ability to regulate the land use of federal postal establishments, meaning the USPS could take action without onerous local zoning restrictions or raucous public meetings.

This means that, at least in theory, it’s in a strong position to develop properties at greater density than local “not in my backyard” activists might otherwise allow.

Opening up these properties to redevelopment proposals could address several problems at once. The USPS — retaining title to the land — could collect a share of the rents from all the new apartments and retail space.

Where the USPS is happy with its current location, it could condition any proposal on being deeded ownership over ground-floor space. And for cities, it would mean a welcome supply of new housing. The USPS could even require that redevelopment proposals set apartments at below-market rates for staff.

Admittedly, no injection of cash is going to address the Postal Service’s long-term challenges. The agency’s vast service obligations and limited institutional flexibility aren’t going away. But part of a near-term solution could be to fully leverage the post office’s existing assets, including its real estate, unencumbered by the forces otherwise blocking new development in cities. The USPS should take advantage of that. Nick Zaiac is a resident fellow in transportation and infrastructure at the R Street Institute, where his research focuses on the Postal Service. Nolan Gray is a professional city planner and a research fellow with the Mercatus Center at George Mason University.