Silent Hill: Townfall is set in the late 1990s, a period of significant technological shift, with the game's remote Scottish setting of St. Amelia chosen for its specific relevance to this era. Director Jon McKellan explained that the time and place were selected for "very specific reasons" tied to the encroaching age of the internet and its impact on isolated communities.

"One, that it is on the cusp of when technology started to explode in the home. We started to get the internet," McKellan stated in an interview with Eurogamer. He elaborated that the protagonist Simon's personal circumstances, combined with the town's nature and the historical period, create a "perfect storm for something to happen in St. Amelia."

. The development team drew inspiration from their own experiences growing up in similar communities. McKellan emphasized the importance of players developing empathy for the town and understanding its history, noting that setting the game in a place the developers intimately understood would lend authenticity.

"We wanted to build a town that felt extremely authentic, felt like this was a place you could believe existed. A place you could care about," McKellan said. He further clarified that the choice of a specific, smaller town over a larger city like Edinburgh was deliberate to enhance this believability and thematic resonance.

The director also touched on the subjective nature of the Silent Hill experience, suggesting that Townfall aims to provide a story that encourages player interpretation. "By the end of the game, I think people will start to piece together why this is almost like the perfect storm for something to happen in St. Amelia," he hinted, with the expectation that players will engage in theorizing about the events and their meanings, a hallmark of the series.

This approach aligns with the series' traditional exploration of guilt, loneliness, and regret, with McKellan suggesting that the narrative is intended to be "deep and meaningful enough story and subjective enough to allow people to really dig into the theories."