Vancouver has 20-person minibuses serving suburban routes. They are what make the rest of the transit system work.
I'm told (but have no idea of how true that is, since my social circles don't intersect it) that New York has a cottage industry of private bus-vans, that sit somewhere between a taxi and a vanpool that get people (usually working poor) to and from work.
From some googling it appears a major reason for the community shuttles is that they are allowed to operate on narrower, suburban streets than full sized busses and have lower fuel consumption per mile.
I'll concede geography limits are a valid reason for smaller vehicles.
Axle weight is a really good point tbh, if you don't have to pay labor costs for the driver it'd make a ton of sense to downsize. Ideally this would be accomplished with taxes on gross vehicle weight. Would make smaller vehicles inherently more economical.
I'm not sure the cheaper argument actually works out in other areas though. If due to peak capacity requirements you have to buy and operate two minibuses vs one full sized bus then that one full sized bus is going to be cheaper to maintain/clean/etc.
However if it's a low utilization route then for sure a minibus is a no brainer. Seems we see that model deployed in a lot of locations referenced above (excluding dollar vans etc, which I see more as a failure of the state tbh).
I'm told (but have no idea of how true that is, since my social circles don't intersect it) that New York has a cottage industry of private bus-vans, that sit somewhere between a taxi and a vanpool that get people (usually working poor) to and from work.