Wilberforce Trust's Wilberforce House development was due to open off Tadcaster Road, in September, but will now be delayed into next year.
The £7.2m scheme is set to provide state-of-the-art apartments for 30 people with visual and hearing impairments and those with other disabilities, alongside a "living and learning" zone - a communal area with a sensory garden and community cafe, as well as space for activities and classes.
It came after Chessingham Grove Management Company (CGMC), which represents nine residents on The Grove, objected to cables for gas, electricity, water and telecoms being run under the strip of land they own at the entrance to Wilberforce House - despite it being only a two-day job.
The trust - whose patron is Dame Judi Dench - said it was unable to meet the demands of CGMC which were "excessively restrictive and costly not just for today but also potentially for the future".
Chief executive Philippa Crowther said it was "terrifically disappointing" for people who were looking to move in and have a "fresh start" after being isolated during the pandemic.
She said they'd negotiated for 12 months without reaching an agreement and now the building was up, had had to make a decision.
They are now looking at rerouting the cables, costing thousands of pounds more.
She said: "The building is beautiful, as are the gardens and there are 30 blind and partially-sighted people waiting for their new homes. But at the moment we can't open anything, we can't get services to it."
The trust said CGMC wanted to be paid over £50,000 for "one time" access under the land, but would have had to negotiate again with CGMC if any repairs or changes were made to the utilities in future. The trust said it has access rights to its land over the grass, but the residents must give permission to run utilities under the strip.
It said it had met the legal costs of £11,000 for both parties, but was not prepared to give away long-standing rights of access to its land in the future
Giving up access would potentially prevent any future development of land they own at the back of the new building, which is currently "green belt" and cannot be developed for another 25 years, Mrs Crowther said.
She said: "We can't understand what the negative impact is other than that the residents have always lived down a cul de sac. Yes, there will be more traffic, but City of York Council passed it at planning. Whether we bring cables in or not the entrance will be there."
Solicitors who have acted on behalf of CGMC declined to comment on "ongoing legal matters".
One of the country’s oldest charities, The Wilberforce Trust began life as The Wilberforce Memorial in the months after the death of Hull-born MP and social reformer William Wilberforce and grew out of a desire to honour him in a way that was befitting to his philanthropic nature.
It was bequeathed the land on Tadcaster Road by benefactors, keen to continue the valuable care of visually impaired people.
The Yorkshire School for the Blind was opened in 1833.
Wilberforce's direct descendant, also called William Wilberforce, had been due to open Wilberforce House.