"There are many small houses along the street."
Translation:Det finns många små hus längs gatan.
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att finnas means "to exist", and that's how it's used - for pointing out that there exist some things, like many small houses in this case.
att vara means to be, and we use that for abstraction. One such example would be det är inte möjligt ("it is not possible"), where the det/it doesn't really signify any concrete object.
Note that you could say det är många små hus längs gatan - it's not ungrammatical, just sounds a little bit off. But it doesn't work the other way around: finnas is strictly for existance.