Although the castle had an important location as a border fortification, it was enfeoffed as early as 1327 to the knight, Conrad of Saldern, due to a lack of funding. He was also permitted to establish an unfortified town to the south of the castle. The settlement of Lauenstadt, founded in 1327, never fully developed however. In 1613 it ranked last in a list of towns in the Principality of Calenberg. Until about 1900 markets were held in Lauenstadt, at which everyday items were sold in open stalls.