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It seems that all the Madrigal family from Encanto stay in the same casita and do not emigrate to other towns.

Is this because they're a closely connected family, or does the gift wear off if they go away from the candle?

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In short, we don't know. The entire film takes place in a magically charmed town surrounded on all sides by impassable mountains. Bruno, in the film's novelisation, indicates that he did briefly consider climbing out, but that the mountains dissuaded him from doing so.

“I don’t understand why you ‘left’ but didn’t leave?”

Bruno looked down and shifted uncomfortably. “Oh, well…the mountains around the Encanto are pretty tall

We also see in The Art of Encanto that the valley is entirely enclosed.

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It's not clear what would happen to the family's magical powers if they left the valley. Maybe we'll find out in the sequel.

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