Terraces supported by traditional dry stone walls, known as pircas, have been constructed on the slopes of urban areas in certain countries in South America over the past few decades. These terraces are intended for housing and green spaces. The current stone-cutting technique and terrace layout quality are notoriously inferior to those used during the pre-Hispanic period. As a result, the structural performance of modern terraces under service or eventual loads during their lifespan is uncertain, having failed in recent seismic events with severe consequences for the residents. The conditions under which it is safe to use pircas for land terracing are unknown, considering the expected intensity level, their use, and their lifespan. This work aims to establish these conditions with a risk-based approach. The study focuses on the terraces of the Peruvian Andes. Firstly, the fragility curves for typical terraces are estimated based on previous experimental data and the analytical estimation of the out-of-plane forces acting on the pirca. The seismic hazard was characterized by the annual exceedance rate of peak ground acceleration. Then, the annual probability of collapse is obtained. Based on international reliability standards, it is concluded that the use of pircas for housing must be restricted to low-hazard areas in the Peruvian territory. However, using them in urban agriculture, green corridors, or erosion mitigation projects is feasible, even in high-seismicity zones. Finally, some recommendations for constructing safe vernacular terraces compatible with local practices and traditions are provided.