Photo - reorganising album structure

Give this a try: boot into Safe Mode according to How to use safe mode on your Mac and test to see if the problem persists. Reboot normally and test again.

NOTE: Safe Mode boot can take up to 3 - 5 minutes as it's doing the following; 

• Verifies your startup disk and attempts to repair directory issues, if needed

• Loads only required kernel extensions (prevents 3rd party kernel/extensions from loading)

• Prevents Startup Items and Login Items from opening automatically

• Disables user-installed fonts 

• Deletes font caches, kernel cache, and other system cache files

What kind of albums are you trying to add to folders? Standard albums you created yourself or shared albums?

You can only drag standard albums and smart albums to folders, not shared albums.

For me it is working in Photos 7 on macOS 12.

Hi

Where is your library stored? If on an external drive, what is the format?

When this started happening did anything change in your system - eg macOS upgrade.