Eight homes closed on Folly Beach in January 2026, twice the count of a year earlier, yet the median sale price slid to $1.25 million, roughly 16 percent below the prior January, with listings sitting on the market 168 days on average and sellers netting about 87 percent of their original asking price, according to Charleston Trident Association of Realtors data reported by the Post and Courier. Charleston County's overall median for the same month was $715,000. Two Follys are trading at once: the primary-residence island and the investor island, and they are not moving in the same direction.
The mechanism behind that split is a business license, not a zoning code. Folly Beach capped investor short-term rentals at 800 permits by voter referendum in February 2023, and in early 2026 a South Carolina appeals court upheld the cap on the specific grounds that the city was regulating business licenses rather than land use. The distinction matters at the closing table, because a business license does not convey with the deed.
The friction that catches buyers off guard
When a Folly Beach property changes hands, the seller's short-term rental license does not travel with it. The city's own guidance is direct: no rental license is transferable, and every new owner must apply fresh. What the new owner is eligible to apply for depends almost entirely on how they intend to occupy the home and how the county classifies them for property tax.
Here is the practical shape of it:
| License class | Who qualifies in 2026 | Notes |
|---|---|---|
| Owner Occupied Short-Term (OSTR) | New owner claiming Folly as primary residence at the 4% property tax rate | Available; starts at $245 |
| Investor Short-Term (ISTR) | Only owners renewing a valid prior-year license, or heirs from an owner of record as of 2/7/23, or medical hardship | Cap has been met; new ISTRs are effectively unavailable |
| Long-Term Rental (LTR) | Any owner renting in 30-plus day increments | Starts at $45 |
| Provisional / SC Vacation Rental Act | New owner with bookings on the books at closing | Temporary, valid only for 90 days post-closing |
A buyer purchasing a second home at the 6 percent non-primary-residence tax rate cannot pick up where the seller left off. The bookings the seller had for July will honor under a 90-day temporary license tied to the South Carolina Vacation Rental Act, provided the buyer produces the closing statement, the seller's rental list, and the management agreement. After that window closes, so does the income stream, unless the buyer has moved up the waitlist, which almost no one has.
That waitlist is real and it is long. Phase 2 opened on October 1, 2024, and as of last fall roughly 200 entries were still waiting with no one having come off the list, per the Post and Courier's February 2026 reporting. One industry tally puts current ISTR licenses in good standing at 955, well above the 800 cap, meaning natural attrition through non-renewals is the only mechanism narrowing the gap. That will take years.
There are a few other closing-table wrinkles worth pricing in. Beginning with the 2024 license year, a property must be rented at least 28 days annually to keep its license active, so a lightly-used family compound can lose its status without a single ownership change. If a buyer tears the house down and rebuilds, the license does not survive the demolition; a new application under the cap is required, which in practice means joining the waitlist. Adding bedrooms requires an updated license with proof of parking, septic capacity, and current tax records.
Why January's numbers finally made sense
For most of the cap's first two years, the market treated STR-licensed homes and unlicensed homes as roughly interchangeable, with a soft premium for the license. That has changed. The volume-up, price-down, days-on-market-up pattern from January 2026 is what happens when two pools of buyers stop bidding on the same houses.
Primary-residence buyers, who account for essentially all new OSTR eligibility, are not paying for an income stream they can generate themselves. Investor buyers, who cannot obtain a new ISTR, are pricing homes as either long-term rentals at the LTR license fee schedule, or as personal-use second homes with no rental offset at all. The rental cash flow that used to underwrite the top of the market has been carved out for any parcel where the seller cannot deliver a transferable license, and that is every parcel.
Time on market is the tell. When a listing sits 168 days and closes at 87 percent of the original ask, the seller usually started with the pre-2023 pricing framework in their head and the market spent five months negotiating them out of it.
What the 2026 ordinance review actually puts in play
The city is not repealing the cap. Mayor Chris Bizzell has said the 2026 review, part of the city's strategic plan, is a chance to revisit provisions that were proposed by previous Mayor Tim Goodwin but never adopted, and to close loopholes rather than expand access. City administrator Aaron Pope framed it as a compromise exercise. In late May 2026, Live 5 News reported the city held a community input session where residents like Regina Anderson pushed back against any softening, arguing amendments are "knuckles in the door" toward a higher cap. Councilmember DJ Rich said the point of the public input phase was to feed an independent study.
Perry Freeman of Perry Hospitality, speaking to ABC News 4 earlier this year, argued the cap functions as a cap on tourists, not just rentals, and that fewer nights sold means fewer restaurant covers and shop visits. Mayor Bizzell has countered that hospitality and accommodations tax receipts remain at or above historic levels.
The read for a buyer or seller writing an offer in the second half of 2026: the number 800 is not moving. The review may adjust the mechanics of inheritance transfers, medical hardship documentation, or how a rebuild affects license status, but the ceiling itself is politically settled and legally affirmed.
A closing checklist worth running before you sign
For buyers considering a Folly Beach home where short-term rental income is part of the underwriting:
- Ask the listing agent for the current STR license type, license number, and 2026 renewal status. Verify it directly through the city's business license office rather than taking the marketing packet at face value.
- Confirm your intended property tax classification. If you will not claim Folly as a primary residence, understand that you will not be issued a new ISTR at closing regardless of what the seller currently holds.
- If bookings are on the calendar, request the seller's rental management agreement and the qualified rentals list, and plan for the 90-day temporary license under the SC Vacation Rental Act. Model your first-year returns assuming those bookings are the last ones.
- Add the waitlist application to your due diligence timeline. It is free to enter and does nothing to guarantee a license, but it starts the clock.
- If the property sits in the Marsh Island or Conservation zoning district, no STR license is available under any circumstance. Confirm the zoning before the underwriting model gets built.
For sellers whose income story has always been the reason the house was worth what it was worth:
- Have your agent price the license premium separately from the real estate. A buyer who cannot inherit the license will not pay for it, and the marketing needs to speak to two audiences at different prices.
- Consider whether your best buyer is a primary-residence family who values a walkable Center Street location on its own merits, rather than an investor who is doing yield math.
- If the home is under-rented, run the 28-day check. Losing the license before the sale closes eliminates the only STR license class that is still being issued: your own renewal.
- Gather two years of rental history, the management contract, and clean records of any bedroom or septic modifications. These are the documents that shorten a buyer's diligence period and hold a contract together when appraisals get thin.
FAQ
Can I buy a Folly Beach home currently used as an investor short-term rental and keep it as one? Not through the license itself. The seller's ISTR does not transfer. You can honor pre-closing bookings for 90 days under the SC Vacation Rental Act, then you are on the waitlist. If you make it your primary residence at the 4 percent tax rate, you can apply for a new OSTR.
Does the cap apply to weekly rentals or only nightly stays? It applies to any rental of less than 29 days. A 30-plus-day rental falls under the LTR class, which has no cap and a much lower fee schedule.
What happens if I inherit a Folly Beach rental? If you inherit from an owner of record as of February 7, 2023, you may apply for an ISTR within 90 days of the ownership transfer. Questions on inheritance and medical-hardship licenses go through the city's licensing office directly.
Is the cap likely to be lifted in the 2026 review? No public signal suggests the 800 number is on the table. The review is focused on procedural language, exceptions, and enforcement clarity.
If you are weighing an offer on a Folly Beach home, or preparing to list one, the license question deserves a conversation before the pricing conversation. The Farrah & Marisa Team works through these details deal by deal with buyers and sellers across Folly Beach and the surrounding Charleston coastal communities. Let's connect.
