A large share of American romance is set in small towns, and the choice is structural rather than nostalgic. The setting solves several plotting problems at once.
A closed community forces contact
Romance requires that two people who might reasonably avoid each other keep meeting, and a town with one diner, one hardware store and one school guarantees it.
In a city the same characters could simply not see each other again, which means the writer must invent reasons for every encounter.
The setting supplies those reasons automatically, freeing the pages for the relationship rather than for logistics.
Everyone has an opinion and a stake
Small communities carry shared history, which means neighbors, relatives and former classmates all have a view about whether the couple should be together.
That external pressure gives the story obstacles that do not require either character to behave badly, which readers of the genre generally dislike.
It also gives the eventual resolution a public dimension, since the community's acceptance is part of what is being won.
The cast becomes the next books
Every friend, sibling and business owner introduced in the first book is a candidate protagonist for the next one, and readers begin choosing favorites immediately.
Writers can therefore build a long series without inventing a new world, and readers return partly for the town rather than for any single couple.
This is why so many romance series are named for a place, and why the setting is treated as a recurring character in its own right.
Occupations are visible and physical
A small town offers work that can be shown on the page, including ranching, firefighting, running a bakery, coaching a high school team or restoring an old building.
Visible work gives scenes something to do while a conversation happens, and it gives characters competence a reader can see rather than be told about.
The same jobs also anchor the town economically, which lets a plot turn on something concrete like a business closing or a property being sold.
Return is a built-in premise
The most common opening has a character coming back after years away, which lets the writer introduce the town through fresh eyes while the character already knows everyone.
That device carries the exposition without slowing the story, and it starts the book with unresolved history already in place.
The setting, in other words, is doing narrative work from the first page, which is a practical reason for its persistence.