Governing the unpriced hazard: A land-use policy framework for spatially concentrated seismic risk when markets do not capitalise it

Hazard policy relies, often tacitly, on property prices to warn households away from danger and to reward mitigation. This paper develops a land-use policy framework for the case in which that mechanism fails. Drawing on neighbourhood-level evidence from post-2023 Istanbul, where any capitalisation of expected earthquake mortality is smaller than the smallest discount that would matter in either the sale or the rental segment, and where ten per cent of neighbourhoods carry more than half the city’s expected casualties in a single contiguous belt, we argue that the conjunction of non-pricing and spatial concentration defines a distinct governance problem that market-reliant approaches cannot reach. We set out a diagnostic typology classifying hazards by whether the market prices the risk and whether exposure is diffuse or concentrated, together with the tests that assign a case to a cell: equivalence testing on the price axis, and local spatial association with a concentration-magnitude criterion on the spatial axis. Istanbul occupies the most demanding cell, which we term silent systemic exposure. We then specify a four-layer framework whose organising principle is that policy must substitute for the missing signal rather than wait for it: dual-market risk disclosure, cluster-scale renewal sequenced by concentration, a layered risk-financing architecture with a public tail, and tenure and equity safeguards. Comparison with four other seismic settings indicates that non-capitalisation is institutionally produced and therefore reversible. We illustrate sequencing and fiscal scale on Istanbul’s central-western cluster and specify the scope conditions for transfer.