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Level 2 burgage residents can wear gambesons.
Level 3 burgage can wear chainmail / plate.
It is implied that residents of level 1 burgage plots are poor peasants, level 2 residents are simple burghers and level 3 residents are wealthy townsfolk.
Therefore level 1 peasants can, at most, "afford" a helmet.
Level 2 residents can get themselves a light armour like a gambeson.
And level 3 residents are rich enough to "afford" chainmail.
I wonder if level 4 residents will be able to afford plate armour....
The game does not track individual wealth of peasants, only abstracted 'regional wealth' of the whole town. That doesn't mean any mail shirts produced in the town or imported are owned but the entire community - the same simply doesn't track who owns what.
And the lord owns none of that. We need to raise wealth taxes to access the proceeds of selling that armour (or any goods). So we obviously cannot freely give away the armour that armoursmith Kunrad crafted to some poor subsistence farmer that cannot afford it. The same way as we cannot order anyone in town to give away their produce for free to another town/region, just because that town is also under our jurisdiction, on our land.
The lord may want to ensure that enough weapons and armour are kept within the region and available, but the militiamen are still expected to buy them themselves, to provide their own weapons and armour (and obviously there's a high incentive for them to get the best they can afford).
The only silly part really lies in how easy it is for a region to massively overproduce everything, including a huge number of chainmail armour pieces. But I'm sure that balance will be tweaked near the end of EA.