Why would they stay?

Once!

Still confused by shoelaces
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Villains can be more interesting if they're not 100% a villain. Your witch could be the village wise woman who heals the sick, as well as a cackling evil-doer.

Or the townsfolk might be in denial. Almost every haunted house story relies on the fact that some people don't think it's haunted. That creepy old house on the corner? It's not haunted. It's just abandoned. There's no such thing as ghosts.

Then I dare you to go in there at midnight. Go on. I double dare you.

In a rational world every haunted house would be bulldozed. But we don't live in a rational world. Stephen King's IT comes to mind, where everyone ignores the fact that the children are going missing.
 

badducky

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We have plenty of historical versions to look at where master illusionists and mesmerists of some stripe or other hold whole populations in their thrall for no apparent reason. Yet, one thing remains the same either through fear or a cult-like adoration, the general population on the whole cannot imagine leaving. It is not a story they permit themselves to tell. When they dream, they do not see a way to the other side of it.

All sorts of machinations, secret police, economic corruption, etc., and it piles on to the mind such that they cannot imagine what life would even be like on the other side of the wall, how to get across it with the ones they love safely.

Tribe is only a story, after all, that is shared together. Country is a story we tell each other. Home is a dream and a place at once.
 

HobbsTuna

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1. They are too poor to leave.

Quite a substainal amount of people get born into bad neighborhoods (with all the non-witch violent death you could want) and never make it out. Lack of funds, education, force of habit

2. Maybe she offers some kind of service?

I don't know your story, but it could for any kind of "only death can pay for life". Old people live longer, children with leukemia miracolously heal. Of course once you have gone into debt, the scales have to reebalanced somehow and if you gow, the collectors will come calling.

Other idea, an industry vital to the town's prosperity is about to fail, but she keeps it going (somehow) and a small chance of getting murdered is preferable to the certainty of destitution.