I've settled on a design for the town system, which I'll outline briefly here:
Towns appear and grow based on local food production. There are rules for how neighboring towns interact, for example smaller towns become suburbs of larger hubs, and can be annexed if the hub overtakes them. Suburbs trade with their own hub city, and hubs trade with nearby hubs.
NPCs are assigned primary jobs based on the town's needs. Players can always do whatever they want. NPCs work in shifts: day job, home improvement, socializing, and sleeping. Jobs are assigned based on the town's needs, and generally focus on a specific type of gathering and/or crafting. For example a woodcutter finds trees, harvests wood, and brings it to a depot. A builder can take materials from a depot and construct someone else's blueprint.
I'm strongly leaning towards more free-form block-based building, instead of the current pre-defined structures. The idea is that structures are mainly decorative, not functional. People are functional. So a shop is a shop because there is a shopkeeper in it, not because it's a pre-defined building type.
Land is parceled out by the town on request, for various purposes. This allows the town to grow organically, but somewhat orderly. I've considered systems for discouraging players from being too greedy with land, but I'm not convinced it's necessary just yet. The game is still single player for the time being, so if you want to grief yourself and the town, why not :)
I think that's enough to get started on coding.