What are the reasons for producing short-form anime?
Most of the short-form Anime that I've seen are comedies that have little to no character development. So it would be quite difficult to find enough content to "fill up" an entire full-length episode. It's the sort of thing where you sit down laugh for a few minutes and leave.

From another angle, the cost reduction of producing short form Anime is probably even lower than you'd expect.

A lot of short form Anime retain the standard 90-second OP and ED. Since each episode is already short to begin with, 3 minutes becomes a significant portion of the episode to get "for free" - thus even less content needs to be produced.