Folly Beach May Scrap Its STR Cap - What Hosts Need to Know Now

Folly Beach's short-term rental market is officially under the microscope. City leaders are reviewing the ordinance that has effectively frozen new investor rental licenses since February 2023, and a push known as the "Scrap the Cap" initiative is pressing them to remove or significantly modify the permit ceiling. For the 955 active rentals operating in a city with an 800-unit permit cap, the outcome of this review could reshape who gets to rent, who gets shut out, and what compliance looks like going forward.

What Is Actually Happening

Folly Beach has been running one of the most restrictive short-term rental programs on the South Carolina coast. The city issues four license types: the Investor STR (ISTR) for non-owner-occupied properties, the Owner-Occupied STR (OSTR) for primary residences, a Medical Hardship ISTR (MISTR), and a Provisional STR (PSTR) for new buyers honoring existing bookings under state law. The problem is that new ISTR licenses are frozen. The waitlist is not open. No new licenses are projected. The only way in as an investor is to inherit a property from an owner of record as of February 7, 2023, or qualify for a medical hardship exemption.

The "Scrap the Cap" initiative is a direct challenge to that freeze. Supporters want city leaders to revisit whether the cap and the moratorium on new investor licenses should stay in place. The review is active as of mid-2026, with the city's pending changes flagged since April 10, 2026.

The Numbers That Actually Matter Right Now

While the policy debate plays out, the current rules are still fully in force. Hosts operating today need to know exactly where they stand.

If you hold an OSTR license, you are capped at 72 rental nights per year. If you hold an ISTR, you must rent a minimum of 28 nights per year or risk losing your license at renewal. Licenses expire ten business days after the end of the business license year, so missing that window is not a minor paperwork issue.

The base business license fee starts at $245, with an additional rental registration permit fee of $17.50 per $1,000 of gross rental income. That means a property earning $50,000 a year owes $875 in permit fees on top of the base license cost. Fines for non-compliance run from $245 to $1,000.

On the tax side, hosts face a combined 13% accommodations tax rate, split between a 7% state rate and a 6% local rate. Airbnb and VRBO both collect lodging tax on your behalf, but manual tax submission is still required directly to the city on a monthly basis. Skipping that filing because your platform collects the tax is a compliance mistake that can cost you your license.

What the Review Could Change for Investors

If the "Scrap the Cap" initiative succeeds, the most immediate effect would be on investors who have been locked out since the February 2023 freeze. A lifted or modified cap could reopen the ISTR waitlist and allow new non-owner-occupied licenses to be issued for the first time in over three years. That would be a significant shift in a market where the active rental count already exceeds the official permit ceiling.

But hosts should not count on a quick resolution. The city's next scheduled review is not until May 2027, and the confidence level on current market data sits at 78 out of 100, reflecting genuine uncertainty about how this plays out. The enforcement trend is listed as increasing, which means the city is not relaxing scrutiny while the debate continues.

What Hosts Should Do Right Now

Whether the cap gets scrapped or survives, the compliance requirements in place today are not going anywhere in the short term. Here is what every Folly Beach host needs to have locked down.

• Confirm your license type and verify it is current. Permits are not transferable, so a property sale does not carry the license to the new owner.
• Check your night count. OSTR holders must stay at or under 72 nights. ISTR holders must hit at least 28 nights to renew.
• Make sure your Designated Local Agent is identified in your rental registration. That person is legally responsible for compliance, and the city requires one.
• File your accommodations tax monthly at cityoffollybeach.com, even if your platform collects it.
• Verify your property has a valid certificate of occupancy, working smoke detectors in bedrooms and common areas, carbon monoxide detectors if you have gas appliances, a fire extinguisher, and at least one off-street parking space per bedroom.
• Carry at least $1,000,000 in general liability insurance. It is required.
• If you are in a Marsh Island or Conservation zoning district, you are ineligible for any STR license regardless of what happens with the cap.

The Bottom Line

Folly Beach is at a genuine crossroads on short-term rentals. The "Scrap the Cap" push has city leaders taking a hard look at rules that have locked out new investors for more than three years. But until something officially changes, the current ordinance is the law, enforcement is trending upward, and the cost of getting it wrong runs up to $1,000 per violation. Watch this space closely. The next move from city hall could open the market back up or tighten it further.

For the complete Folly Beach compliance guide including tax calculator, checklist, and daily monitoring, see Folly Beach, SC STR Regulations.