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Once you hit a population of 10, you'll receive a letter from the same advisor who helped you get established -- this will start the quest to upgrade.
At each tier (tier 2 is after you upgrade the hearth, and there's a third tier after that) you unlock new features for your town, one of which includes new and fancier building templates.
Official development ended a few years ago.
The Authorised Community Expansion (ACE) mod is an officially-supported* continuation project to expand the game and round it out better, it continues to be updated and they're about to hit their own 1.0 milestone with the long-awaited addition of the Dwarf kingdom (although they'll probably keep adding to ACE long after 1.0, that's just a marker of them having added all the major features they originally wanted to add.)
*read: the devs not only gave their blessing for the continuation, they actively helped out with it as much as possible during the last couple of months of official development before the Stonehearth dev team shut down and they had to move on to their new assignments.