(Bloomberg) — Kambiz Shahbazi says the value of his four Boston office buildings has tumbled because of the damage inflicted on the market by Covid-19 and the resulting exodus by tenants.

Boston has already lowered the assessed value of the collected properties over the past two years by about 12%, but Shahbazi says that doesn’t come close to reflecting the true declines. So he’s filed challenges to the city’s assessments in the hope he can ultimately lower his tax bills on the properties. For at least one, he says the value should be discounted by about 50%.

He’s far from alone as Boston landlords struggle with empty offices and high financing costs that make it difficult to upgrade or convert buildings to residential. Owners have challenged assessed values for 388 commercial buildings in the district that includes downtown Boston this year, according to city data obtained through a public records request. That’s an 83% jump from 2024 and the highest number of requests since at least 2020. 

It’s a worrying sign for the city, which is already struggling with strained finances and relies on property taxes for almost three-quarters of its $4.8 billion budget. 

“The values have been decimated,” Shahbazi, founder of KS Partners said of the city’s buildings, describing “crazy vacancies” for so-called Class B and C buildings. “It might take a long time, and the city might just have no option other than to fight their way and stall, but at some point they’re going to have to reckon with this debacle,” he said. 

Boston is more reliant than most US cities on commercial property taxes. In the years leading up to Covid, its finances flourished thanks to rising property values and booming real estate development, but those values have tumbled as office vacancies still exceed 20% and workers have been slow to return to the downtown. 

Boston’s office buildings stand to lose almost 50% of their value over the next half-decade, according to an analysis by Tufts University’s Center for State Policy Analysis and the nonprofit Boston Policy Institute. That decline could cost as much as $1.7 billion in tax revenue over that span.

The city’s assessing officials seek to minimize year-to-year swings during both booms and busts in order to stabilize the budget, said Evan Horowitz, the Tufts state policy center’s executive director. But with real-world office values sinking so rapidly, landlords have run out of patience and are now trying to “speed things up” through the challenges to the city, he said. 

Officials lowered commercial property values by just 3% citywide in the fiscal year that ended in June, the first time they had decreased since 2020.

As of mid-July, officials had granted only 11 of the 388 abatement applications in the downtown area, mostly for small properties, records show. 

A Shahbazi property is one of the few to win an abatement: The city agreed to take nearly $2 million off its initial $14.2 million assessment for an 11-story Court Square office building that Shahbazi says is about two-thirds empty.

Landlords can appeal the city’s decision to the state Appellate Tax Board. The owners of a handful of Boston’s largest office buildings are awaiting rulings based on appeals made in prior years. Those decisions could set a precedent for similar properties post-pandemic.

Business groups have clashed with Mayor Michelle Wu over her handling of property taxes. The Pioneer New England Legal Foundation, a law firm that counts some of Boston’s best-known corporate lawyers as board members, has accused her administration of illegally increasing the property assessments of owners with appeals before the state board, forcing them to pay more in taxes. 

The foundation petitioned the Massachusetts Department of Revenue to launch an investigation, but the agency’s leader responded last week that his staff was “unable to substantiate” the claims. Frank Bailey, a former federal judge who leads the foundation, said in an interview that the organization is considering a lawsuit to challenge the practice. 

A spokesperson for the Wu administration called the claims “baseless and full of misinformation,” saying that the process is guided by state law and that the city has used it for decades.

Josh Kraft, a nonprofit leader who’s challenging Wu in this year’s mayoral race, called Pioneer’s allegations “serious and credible” at a press conference outside City Hall on Thursday. If property owners bring the city to court and win refunds on hundreds of millions of dollars in overpaid taxes, “it will be a massive blow to Boston’s finances,” Kraft said.

“Right now, it looks like the mayor is using her office to punish property owners for exercising their rights under the law,” said Kraft, the son of New England Patriots owner Robert Kraft.

Last year, Wu sought to temporarily raise commercial property taxes in order to limit an increase for homeowners, but failed to obtain the approval she needed from state lawmakers before tax bills were mailed to residents. She is making the same push this year.

“I’m at a different neighborhood association or event multiple times a day where this comes up, that people are feeling the pressure of property taxes making it difficult for them to stay in their homes,” Wu said in a recent interview at Bloomberg’s Boston office.

The mayor has sought to revitalize downtown Boston by giving out grants to retailers to fill vacant storefronts and offering tax incentives to turn empty office buildings into apartments and condos. She also proposed rezoning downtown to allow for more towers in a bid to create more housing in the neighborhood.

Josh Kraft has opposed Wu’s proposal to shift more of the tax burden onto commercial landlords. He has floated plans to create a cluster of new businesses in the neighborhood and invite Boston’s largest universities to invest more in the city center.

A revived downtown would help prop up property values and advance the revenue Boston collects from those levies. Amid a budget crunch caused by dwindling pandemic aid and a softer economy, those dollars are even more important after the Trump administration cut research funding to the lifeblood of Boston’s economy — health care and higher education. 

(Updates with Josh Kraft comments in 16th paragraph.)

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