This is the biggest Folly Beach rental-policy headline in years. It is not an automatic green light for new investor Airbnbs. Read the ruling for what it is, and what it is not.
In one sentence: Circuit Judge Thomas J. (TJ) Rode struck down Folly Beach’s short-term rental cap ordinance and its revenue-based rental registration fee as illegally adopted under South Carolina law. The city says it will appeal and will keep enforcing the cap for now.
What happened
In February 2023, Folly Beach voters approved a referendum that limited investor-owned short-term rentals while leaving owner-occupied STRs uncapped. The city then required operators to hold a business license, pay a license tax, and pay a separate permit/registration fee.
In August 2024, Park Lane Partners LLC and Elizabeth Spratt Cooper sued in Charleston County. After hearings in January and April 2026, Judge Rode ruled on Friday, Aug. 14.
Two pieces fell:
- The cap ordinance, because the judge found the referendum was improperly used to impose a tax. South Carolina law, he concluded, does not let a ballot measure levy a tax; that power sits with city council.
- The rental registration fee, which was based on gross rental revenue and deposited into the city’s general fund rather than paying for a specific service. The city conceded it was not a true service charge. The judge called it an “improper tax disguised as a fee.”
What the city is saying
Folly Beach says it will appeal, which could pause the effect of the ruling. In a Facebook statement summarized by The Post and Courier, the city stressed that the ruling “made no judgement on the cap itself, only on how it was adopted,” and that it will not immediately stop enforcing the cap or rewrite rental procedures overnight. Any new proposals would be advertised for public review before council acts.
For you: Treat the Aug. 14 order as a live legal fight, not a finished free-for-all. Until the city, a stay, or a higher court changes practice on the ground, confirm licensing with Folly Beach staff before you count on a new investor permit.
Why this matters on Folly
The island has been over its own number for a while. At the most recent public counts, Folly had roughly 955 investor licenses in good standing against an 800 cap, with about 200 names on a waitlist that barely moved. Existing licenses kept renewing; attrition was the only way new ones opened.
That backlog is why buyers kept asking, “If I buy this house, can I get on Airbnb?” and why the honest answer was usually: not if you need a new investor license this year. A ruling that voids the ordinance changes the legal foundation. It does not instantly clear the waitlist or rewrite operations while an appeal is pending.
What this does not do
- It does not rewrite Charleston, Mount Pleasant, IOP, or Sullivan’s Island rules. Those are separate jurisdictions. See the town-by-town map in Can You Airbnb It?
- It does not erase HOA or condo covenants. A recorded restriction can still block short-term rentals even if the city’s numeric cap falls.
- It does not cancel state and local accommodations taxes. South Carolina’s sales/accommodations tax stack still applies to short stays. Confirm remittance through MyDORWAY and whatever local lodging tax still applies.
- It does not mean every Folly listing is suddenly an investment slam dunk. Flood insurance, elevation, wind mitigation, and carrying costs still dominate Folly math. See Folly Beach real estate.
Practical next steps
If you are under contract or shopping Folly for STR income
- Call or email Folly Beach business licensing and ask, in writing, whether new investor STR licenses are being issued today and how the Aug. 14 ruling and any appeal affect applications.
- Do not price the house solely on Airbnb comps until that answer is in writing.
- Pull HOA/condo docs the same day. City permission is useless if the covenants forbid stays under 30 days.
If you already operate a Folly STR
- Keep your current license file, renewals, and tax filings in order while the appeal plays out.
- Ask the city which fees still apply after the registration-fee portion of the ruling.
- Watch council agendas. The city has already been reviewing STR policy in its 2026 strategic plan; a loss in court usually means a rewritten ordinance attempt, not silence.
If you are a primary-resident owner considering occasional rentals
- Owner-occupied STRs were never inside the 800 investor cap. Confirm the current owner-occupied path and any remaining fees with the city, then check insurance and your mortgage.
My take
This is real. A circuit judge voided the legal footing of Folly’s investor cap and called the revenue-based registration fee an improper tax. That matters for property rights, for the waitlist, and for how other South Carolina beach towns draft rental rules going forward.
It is also incomplete. The city intends to appeal. Enforcement is continuing in the meantime. A future council-adopted ordinance, written without the referendum tax problem, could put a numeric limit back on the board. Buyers who treat the Facebook headline as permission to underwrite full occupancy tomorrow will get hurt.
Bottom line: Folly Beach just had its STR ordinance knocked down on adoption and fee grounds. Watch the appeal, verify licensing with the city, and run the insurance and HOA math the same way you always should on a barrier island. If you want a second set of eyes on a specific Folly address, that is a conversation worth having before you waive due diligence.
Part of Things to Know in 2026. For the metro-wide rental map, read Can You Airbnb It? Charleston short-term rental rules.