The City Council on Tuesday approved the deannexation of a 390-acre parcel owned by The Institute of Health and Healing at Wildwood.
Councilman Chip Henderson made the motion, citing concerns from the fire department and others about serving the property.
Officials noted that it is necessary to go into Georgia from Chattanooga to reach the tract, and access is only by a narrow railroad underpass.
Institute officials said they want to build housing at the site for staff, but were denied a rezoning request in 2006.
The property was annexed by the city in 1995.
The institute has been paying taxes on the property.
Fire officials said they are able to access the property, but better access would be needed if a number of homes go in.