Sanctuary unknown in a squalid area (6)
I believe the answer is:
asylum
'sanctuary' is the definition.
('asylum' can be a synonym of 'sanctuary')
'unknown in a squalid area' is the wordplay.
'unknown' becomes 'y' (algebra).
'in' is an insertion indicator.
'squalid area' becomes 'slum' (I've seen this before).
'a'+'slum'='aslum'
'y' inserted within 'aslum' is 'ASYLUM'.
(Other definitions for asylum that I've seen before include "'Refuge, sanctuary (6)'" , "Place of refuge, sanctuary" , "Haven or hospital for the mentally ill" , "Refuge or home for mentally ill" , "Place of safety or protection" .)