Cozy fantasy got a big boost during the pandemic and in this world of nail-biting news headlines I think it will continue to do well. People want to read something warm and comforting in times of stress and trouble.
In fact, I'm trying to write a cozy fantasy right now (working title: Walking on Moonlight) so I'm trying to read more of the genre in an attempt to see what tropes it uses and what are its strengths.
What I've found so far:
1/ Setting can be either contemporary with a fantasy element or high fantasy/secondary world.
Travis Baldree's Legend & Lattes and sequel Bookshops & Bonedust have a high fantasy setting. So does The Spellshop by Sarah Beth Durst. But there are a plethora of paranormal romances such as Witch Please by Ann Aguirre, The Ex-Hex by Erin Sterling, etc. with our-world-but-with-magic settings.
Ten years ago urban fantasy was big with stories mostly set in cities. Cozy fantasy seems to favor small towns and close-knit communities more.
2/ Friendships are just as important as romantic relationships.
The main character may start off as a loner or an outcast or just rather hapless (The House on the Cerulean Sea by T.J. Klune, The Spellshop, The Only Purple House in Town by Ann Aguirre, etc) but by the end have made a number of quirky but loyal friends. Family, which may be found/chosen rather than by blood, may also be a theme.
3/ What's at stake is usually lower. Instead of the fate of the world, characters may be trying to start or save a business, or follow a long-held dream. Stakes may still rise over the course of the novel (by the end of The Spellshop it's clear that something needs to be done to save the island as a whole from magically-warped storms) but even then it's more likely to be a town or group instead of nations.
4/ A happy ending. The happy ever after (or at least happy for now) has long been a requirement of romance as a whole and definitely applies to cozy fantasy too. The reader should believe from beginning to end that everything will turn out all right, and the bumps will be mostly gentle ones.
Those are my conclusions so far--but I haven't yet read as widely as I'd like in the subgenre. If you have examples that counter mine, I'd love to hear about it in the comments!