One of my player knights wants to build a tavern. He's got a good-sized Salisbury estate that is near a few roads, but the idea of a tavern really doesn't seem period-appropriate.

I'm wondering if he sees this as a money-making opportunity, or if he wants to extend hospitality and drinking to passersby. He does have a manse in the town, so expanding that and opening it to guests might be another way to accomplish his goals.

What would you recommend?

This happens in every game I gm. Taverns. Brothels. Bandit Outfits. Mercenary Companies. Trading Ships full of cargo. Banks.

I hate having to stonewall players economically but the alternative is that I have to figure out something fair and balanced for EVERY single thing the players build that isn't in the books, or else I run the risk of overindulging them to the point where the campaign becomes too overpowered to quickly.

1) "Your character has no knowledge of how that kind of thing would work".

2) "That is dishonorable"

3) "Okay, you build it, it makes you a profit of .1 libra a year"

4) "There isn't a market for that kind of thing." For example, they want to build a tavern? "The town already has one" or "There isn't enough business in the area for that to be a sustainable enterprise".

Taverns (tabernae, alehouses, pubs) have existed since Roman times. While KAP is set in 5th and 6th centuries, the society is taken from the Middle Ages (feudalism, and a lot of the legislation referred in BotW is from Norman and Angevin kings of England, 11th - 13th centuries. As such, a tavern is not impossible. However, it is your campaign. If you don't feel that it is appropriate, then forbid it. I would be more inclined to forbid it on the "you are a knight, not an innkeeper" or "there already is one" grounds rather than "such a thing doesn't exist" although, again, up to you.

It depends a bit on the period, too. Definitely in Anarchy, the trade and hence travel is pretty much at 0%, so the tavern would not make any profit, only costing money to operate, and not make much sense to build. Boy King would see some recovery, but what with the wars everywhere, trade & travel might be slow to pick up. Only around Conquest would you really start to see some benefit.

I'd also talk to the player, too. How is he seeing this place? What is he hoping to get out of it? Is it something you wish to deal with as a GM? That is also a valid point to make with the players: "I don't want to introduce such a plot element into this campaign." If the GM is not having fun, then the game probably is not too fun for the players, either. GM fatigue is a real thing.