Winterhold is situated in the extreme northeast of the region of Skyrim. The sorry state we find the city in during The Elder Scrolls V is explained by The Great Collapse, a cataclysmic event that took place 79 years before the events of the game. A series of violent storms suddenly rocked Skyrim’s north coast, causing the landmass Winterhold was situated upon to erode rapidly, plunging much of the city into the sea. When you come upon the once-great city, you come upon its dying embers: a divided populace, little to no commerce, and a Jarl whose subjects ignore him.
Despite the Collapse offering a convenient excuse for the lifeless city the player encounters, Winterhold still has the feel of a place that could've offered a whole lot more. The only available locations are the Frozen Heart inn, Birna’s humble shop, Kraldar’s house and the Jarl’s longhouse. The inn, as the only profitable enterprise in town, acts as the centre of “life” in Winterhold. The people of Winterhold are suspicious of the neighbouring College of Winterhold, blaming the mages for the Great Collapse.
There was more opportunity to lean into this storyline in Winterhold. Nordic culture in general tends to be suspicious of mages and this is especially true in Winterhold due to its proximity to the College. A full-blown anti-mage storyline à la Dragon Age, where mages are sequestered by a fearful population, would have been a nice addition to the intrigue and atmosphere of the hold. For instance, maybe there’s a rabble-rouser who fabricates or unearths evidence of the College’s involvement in the Collapse, incensing the locals and causing a large-scale confrontation between the mages and locals to start brewing.
There are tidbits of this sentiment sprinkled into the game. The Jarl, Korir, is deeply suspicious of the College and can be seen giving his son a lecture on how the College caused the Great Collapse which crippled Winterhold. This could have been expanded upon to make it more than mere gossip and old tales; half of a once-great city falling into the sea is no small matter, so the people should hold a deep resentment of who they believe are the likely perpetrators.
This could also have tied into the relatively straightforward College of Winterhold questline. Perhaps you could've been tasked with quelling the mob, either through persuasion or force; or maybe have been given the option to side with the mob against the College, changing the game's world-state by storming that Ivory Tower and making the College a place for the people. The point is, there was significant potential there to explore the anti-mage sentiment that’s only hinted at during the Elder Scrolls V.
After the Red Year of 4E 5, when the Red Mountain emerged from its dormancy and began erupting again, Winterhold saw a lot of Dunmer refugees. While these folk were initially welcomed, they were driven out following the Great Collapse. There was more scope to explore the racism against the Dunmer in Winterhold, as the game does in Windhelm. Perhaps a light-hearted quest about helping a Dunmer ingratiate himself to the local populace?
The people of Winterhold have suffered for over seven decades in the harshest climes of Skyrim, which you'd have thought would impact the hardiness and attitudes of the local populace. Skyrim is an imperial province, and its people are largely civilised. Winterhold was an opportunity to show how people live on the margins. There are a couple of cool flavour touches. For instance, did you know that if you get arrested in Winterhold you get thrown in a cave called The Chill rather than a traditional cell? The cave is guarded by a Frost Atronach which the player will have to slay to escape. The lack of a functional prison is a nice touch, but it's just one hint at the idea that Winterhold has a more brutal culture than the rest of the region.
The people may have struggled to find enough food because of its extreme northern location and the lack of people to engage in hunting post-Collapse. It’s stated in-game that the other Jarls don’t listen to Korir because Winterhold is no longer seen as important. This could have been used to illustrate the regional inequality of Skyrim and how the Empire seems to have forgotten about Winterhold. Instead, it’s just used to further the paper-thin narrative that Winterhold is a dead city and that’s that.
Winterhold has tons of history and intrigue to tap into, but is ultimately used as an inconsequential gateway that the player passes through to reach the College of Winterhold. So, with so much potential to explore some deep stories related to Winterhold and its people, who's up for creating a Winterhold Reborn mod?