Folly Beach Short-Term Rental Rules Are Changing: What the Recent Court Ruling Could Mean for Property Owners

August 2026

If you own property on Folly Beach—or have been thinking about buying a vacation rental there—you may have heard some big news about the city's short-term rental rules.

A recent Charleston County court ruling has challenged the legal foundation of Folly Beach's voter-approved short-term rental cap, potentially opening the door to significant changes in how short-term rentals are regulated on the island.

But this story is far from over.

The City of Folly Beach has already voted to appeal the ruling and is also moving toward a temporary moratorium on most new short-term rental business licenses while the legal process and the city's ongoing short-term rental study continue.

Here's what we know—and what it could mean for Folly Beach real estate.

What Was the Folly Beach Short-Term Rental Cap?

Folly Beach has taken a relatively restrictive approach to short-term rentals for years.

In 2023, Folly Beach voters approved a referendum that established a cap of 800 non-owner-occupied short-term rental licenses on the island. The goal was to limit the number of investment properties operating as vacation rentals while maintaining a balance between full-time residents, vacationers and property owners.

The cap became an important factor in the Folly Beach real estate market.

For owners who already had a short-term rental license, the limited number of licenses provided a valuable component of their property's investment potential. For buyers, the availability—or lack—of a short-term rental license could significantly affect the property's value and income potential.

Why Did a Judge Rule the Ordinance Was Illegal?

On August 14, 2026, a Charleston County Circuit Court judge ruled that the city's use of the referendum process to establish the short-term rental cap was improper under South Carolina law.

The issue wasn't simply whether Folly Beach could regulate short-term rentals. Rather, the court focused on how the regulation was enacted.

The court found that the referendum improperly involved matters related to business licenses and taxation—areas that South Carolina law reserves to the governing body of the municipality rather than allowing voters to establish through the initiative and referendum process.

The judge also ruled that Folly Beach's separate short-term rental registration fee was an unlawful tax rather than a permissible regulatory fee.

That distinction is important.

The ruling does not necessarily mean that Folly Beach can no longer regulate short-term rentals. Instead, it calls into question the legal method used to establish the existing 800-license cap and the associated fee structure.

So, Is the 800-License Cap Gone?

Not necessarily—not yet.

This is where things get interesting.

The City of Folly Beach voted on August 19 to appeal the court's ruling. City Council also moved forward with a temporary moratorium on most new short-term rental applications while the appeal and the city's short-term rental study move forward.

There is currently an automatic stay associated with the court ruling, and the city is working to preserve its options while the legal process continues.

In other words, this is a transition period—not a free-for-all for short-term rentals.

Anyone considering purchasing a Folly Beach property specifically because of its potential as a short-term rental should be very careful about assuming that the rules have permanently changed.

What Could Happen Next?

There are several possible outcomes.

1. The City Could Win on Appeal

If the city successfully appeals, the existing cap and regulatory structure could potentially remain in place, depending on the outcome of the appellate process.

That would mean the current limitations on short-term rental licenses could continue.

2. The Court Ruling Could Stand

If the ruling ultimately stands, Folly Beach would need to reconsider how it regulates short-term rentals.

That doesn't necessarily mean unlimited Airbnb and vacation rentals.

The city could potentially adopt a new short-term rental ordinance through the city council, structured in a way that complies with South Carolina law.

That could include new licensing requirements, occupancy restrictions, operating standards, geographic limitations, or other regulations.

3. Folly Beach Could Create a New Regulatory System

This may ultimately be the most interesting possibility for real estate investors.

The city has already indicated that a short-term rental study is underway, with additional policy decisions expected as that process continues.

If the existing cap cannot be maintained in its current form, Folly Beach could have an opportunity to redesign its entire approach to short-term rentals.

That could result in a system that looks very different from the current 800-license structure.

What Could This Mean for Folly Beach Property Values?

This is where I think the situation becomes particularly interesting for real estate buyers and sellers.

Short-term rental rights can have a significant impact on the value of a property.

If the number of properties legally available for short-term rental increases, more buyers may become interested in Folly Beach investment properties.

More competition among rental properties could also put pressure on rental rates and occupancy.

On the other hand, if Folly Beach ultimately maintains a strict limitation on short-term rentals, existing licensed properties could continue to command a premium because the ability to operate a vacation rental remains relatively scarce.

There is also another possibility: uncertainty itself could affect the market in the short term.

Buyers who are primarily interested in investment properties may hesitate until the legal situation becomes clearer. Sellers may also have difficulty determining how much value to assign to a property's future rental potential.

What About Buyers Thinking About Purchasing Now?

This is where I would strongly encourage buyers to do their homework.

If you're considering purchasing a Folly Beach property with the intention of using it as a short-term rental, don't base your numbers on the assumption that the 800-license cap has disappeared permanently.

Instead, analyze several scenarios.

What does the property look like financially if it can operate as a short-term rental?

What happens if the property cannot obtain a license?

What happens if the city creates a new licensing system?

And what happens if the property is subject to additional restrictions in the future?

A property that only makes financial sense as a short-term rental may carry considerably more risk right now than a property that works as both a vacation rental and a traditional long-term or second-home investment.

What About Existing Short-Term Rental Owners?

Existing owners should also avoid making assumptions.

The legal situation is evolving, and the city's proposed moratorium includes exceptions related to certain renewals, wait-list applicants, 72-day licenses and applications made after the court ruling.

The city has also indicated that it wants to minimize its legal exposure while the appeal is pending.

That means owners should pay close attention to official announcements, licensing deadlines and any new ordinances adopted by City Council.

The Bigger Picture for Folly Beach

Regardless of how the lawsuit ultimately ends, I think one thing is clear:

Folly Beach's short-term rental rules are likely to remain a major issue in the local real estate market.

The debate goes far beyond Airbnb.

On one side are residents who are concerned about the availability and affordability of housing, neighborhood character and the impact of vacation rentals on the community.

On the other are property owners and investors who argue that homeowners should have the ability to use their property as an income-producing asset and that short-term rentals are an important part of Folly Beach's tourism economy.

Both sides have legitimate interests—and the city now has to find a regulatory framework that can survive legal scrutiny.

What This Means for the Future

For now, I would consider the Folly Beach short-term rental market a watch-and-see situation rather than a settled one.

The recent ruling could ultimately create more opportunities for property owners, particularly if the city is unable to maintain the existing 800-license cap.

But there is also a very real possibility that Folly Beach will replace the current system with another form of regulation.

The city has appealed the ruling, is considering a temporary moratorium on new licenses, and is continuing its short-term rental study.

The biggest takeaway for buyers and sellers is this: don't assume that today's legal ruling tells us what Folly Beach's short-term rental regulations will look like six months or a year from now.

If you're buying a Folly Beach property because of its short-term rental potential, the property's value should be analyzed under multiple possible regulatory scenarios.

And if you're thinking about selling a property that has an existing short-term rental license—or you're considering purchasing one—this may be an especially important time to understand exactly what rights and restrictions are attached to that property.

The rules are changing, and the next several months could have a meaningful impact on the Folly Beach real estate market.

I'll be watching this closely and will continue to share updates as the appeal and the city's new short-term rental policies develop.

This article is intended for general informational purposes and is not legal advice. Short-term rental regulations can change quickly. Property owners and buyers should consult the City of Folly Beach and qualified legal and real estate professionals regarding the rules applicable to a specific property.