Folly Beach STR Cap Under Review: 955 Active Rentals, 800-License Limit Debated

955 Active Rentals, an 800-License Cap, and a City Council That Just Reopened Everything

Folly Beach, South Carolina currently has 955 active short-term rentals operating against a hard investor license cap of 800 ISTR (Investor Short-Term Rental) licenses, and on May 27, 2026, the city held a formal community input meeting to consider whether that cap, and much of the surrounding ordinance, should be rewritten. The city council has commissioned an independent study of the current rules, and proposals on the table include eliminating the cap entirely, enforcing noise restrictions more aggressively, applying differentiated zoning regulations, and evaluating crime data tied to rental properties. For any operator, investor, or prospective buyer in this market, the regulatory ground is shifting.

The Numbers

Every material data point for the Folly Beach STR market, drawn from city records and the current ordinance, is consolidated below.

Metric	Value
Active STR count	955
Investor STR (ISTR) license cap	800
Permit status	Waitlist (new ISTR applications frozen)
Owner-Occupied STR (OSTR) annual night limit	72 nights per year
ISTR minimum rental requirement	28 nights per license year
Provisional STR (PSTR) validity period	90 days maximum
Inherited ISTR application window	90 days from ownership transfer
Base business license fee	$245
Additional rental registration permit fee	$17.50 per $1,000 of gross rental income
Combined lodging tax rate	13% total (7% state + 6% local)
Tax filing frequency	Monthly
Minimum fine for non-compliance	$245
Maximum fine for non-compliance	$1,000
Enforcement trend	Increasing
Enforcement level	Medium
Required liability insurance minimum	$1,000,000
Parking requirement	1 off-street space per bedroom
Governing ordinance	Chapter 117: Short Term Rentals
Pending changes flagged since	April 10, 2026
Last market data verification	May 25, 2026

Regulatory Context: The Full Rulebook as It Stands Today

Folly Beach operates one of the most restrictive STR frameworks in South Carolina. The city issues four distinct license types under Chapter 117: Short Term Rentals:

• ISTR (Investor STR): For non-owner-occupied properties. New licenses are effectively frozen. Only existing licensees may renew, with narrow exceptions for heirs of owners of record as of February 7, 2023 (who must apply within 90 days of ownership transfer) and medical hardship cases.
• OSTR (Owner-Occupied STR): For primary residences assessed at the 4% property tax rate. Rentals are capped at 72 nights per year. These licenses remain available.
• MISTR (Medical Hardship ISTR): Requires annual certification by a licensed medical professional. No owner may hold more than one MISTR.
• PSTR (Provisional STR): Issued only to buyers of existing licensed STRs under the SC Vacation Rental Act. Valid for a maximum of 90 days to honor existing bookings.

Properties in Marsh Island and Conservation zoning districts are ineligible for any STR license. All licensed properties must be rented a minimum of 28 nights per business license year or risk losing their license. Licenses expire ten business days after the final day of the previous business license year. Permits are non-transferable upon sale.

On the tax side, operators face a 13% combined lodging tax (7% state, 6% local), filed and remitted monthly. Both Airbnb and VRBO collect and remit lodging tax on behalf of hosts, but manual tax submission is still required by the operator for any bookings made outside those platforms.

Safety requirements include smoke detectors in all bedrooms and common areas, carbon monoxide detectors where gas appliances are present, a fire extinguisher, egress windows, fire suppression compliance, a valid certificate of occupancy, and a building code inspection. A Designated Local Agent must be named in every rental registration application and is legally responsible for compliance. Minimum general liability insurance coverage is $1,000,000. Occupancy limits are tied to septic capacity, not a fixed bedroom multiplier.

What Changed and Why

The current review was formally flagged as a pending regulatory change on April 10, 2026, and the public input meeting was held on May 27, 2026. The trigger is a combination of long-running community tension and a council decision to commission an independent study of the ordinance before making any amendments.

The core fault line is the 800-license ISTR cap, which residents voted to establish and which a vocal bloc of permanent residents insists must remain unchanged. Resident Regina Anderson stated at the meeting: "No one has a problem with there being short-term rentals on the island. It's the cap, and a cap is a cap, and the community voted overwhelmingly that we wanted this cap." On the other side, property owners and rental operators argue the cap has been economically harmful.

Council member DJ Rich framed the process as fact-finding first: "You want to have as much factual information in front of you as you can before you make any big decisions." The independent study will identify weak points and strong points in the current ordinance and recommend whether and how to amend it. Additional proposals before the council include enforcing noise restrictions on rental properties, applying differentiated zoning rules, and evaluating crime data associated with STR activity. The enforcement trend is already rated as increasing in current market data, meaning operators should expect more scrutiny regardless of how the ordinance review concludes.

What Operators Must Do Now

1. Confirm your license type and renewal status immediately. ISTR licenses are frozen for new applicants. If you hold an existing ISTR, verify your renewal eligibility and ensure you have met the 28-night minimum rental requirement for the current license year. Review your status at cityoffollybeach.com/short-term-rental. Failure to renew on time means your license expires ten business days after the license year ends.
2. If you inherited a property after February 7, 2023, apply for an ISTR within 90 days of ownership transfer. This is the only pathway to a new ISTR outside of medical hardship. Missing the 90-day window closes the door entirely. Fines for operating without a license range from $245 to $1,000.
3. Register for and remit the 13% lodging tax monthly. Even if Airbnb or VRBO collects tax on your behalf, you are required to file manually for off-platform bookings. Register and submit at cityoffollybeach.com/accommodations-tax-2022. Filing frequency is monthly, with no grace period noted in current rules.
4. Audit your safety and inspection compliance now, before enforcement increases. Required items include smoke detectors in all bedrooms and common areas, CO detectors if gas appliances are present, a fire extinguisher, egress windows, fire suppression compliance, and a valid certificate of occupancy. Building code details are at follybeach.com/building-permits.
5. Verify your parking configuration meets the per-bedroom standard. The city requires at least one off-street parking space per bedroom. This is an inspection point and a potential fine trigger as enforcement activity increases.
6. Carry a minimum of $1,000,000 in general liability insurance and keep documentation current. This is a hard requirement under the current ordinance. Confirm your policy meets the threshold and that your Designated Local Agent information in your rental registration is accurate and reachable.

Bottom Line

The cost of full compliance in Folly Beach includes a $245 base business license fee, a $17.50-per-$1,000-of-income registration surcharge, a 13% lodging tax remitted monthly, a $1,000,000 liability insurance policy, and the time and cost of passing a building code inspection. That is a real but manageable overhead for a licensed operator. The cost of non-compliance is a fine of up to $1,000 per violation, potential license revocation, and, if the ordinance review results in tighter rules or expanded enforcement, the risk of being caught operating outside a framework that is actively being rewritten. With 955 active rentals already above the 800-license cap and enforcement trending upward, the window for quiet non-compliance is closing. Operators who are not fully documented, inspected, and tax-current before the independent study concludes are taking on avoidable financial and legal exposure.

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