Short answer: It is okay only as a lightweight filler, not as a true drainage layer. For drainage, what matters most is drainage holes, a well-aerated potting mix, and watering habits. A layer of Styrofoam peanuts at the bottom of an urban planter box does not make water drain better. In some cases, it can make things worse by creating a perched water table, where water sits above the coarse layer instead of moving freely out the holes.
Styrofoam peanuts can be useful if you need to reduce the weight of a large planter on a balcony or rooftop that has weight limits. They take up space that would otherwise be filled with expensive potting soil. But they should be contained. Loose peanuts can shift, float, mix into the soil, and block drainage holes. They can also blow out of the planter and become litter. In urban areas, that litter can enter storm drains and break into microplastics, harming waterways and wildlife.
If you choose to use them, put them in a mesh bag, old pillowcase, or fabric barrier. Place the bag at the bottom, then cover it with landscape fabric before adding potting mix. This keeps the peanuts separate and prevents them from clogging the drainage holes. Make sure the planter has proper drainage holes and is raised slightly so water can escape. Never use biodegradable starch packing peanuts, because they dissolve in water and turn into a sticky mess.
For better drainage and healthier roots, use a high-quality potting mix designed for containers. It should contain perlite, pumice, bark, or coir for air space. If you need lightweight filler, consider perlite, pumice, rice hulls, or a false bottom made from a sturdy plastic grid. Avoid gravel or a thick layer of any coarse material at the bottom, because it can worsen perched water.
So, is it okay? Yes, with limits: use Styrofoam peanuts as a contained lightweight filler, not as a drainage fix. If drainage is your goal, focus on drainage holes, the right potting mix, and smart watering. If you are worried about environmental impact, skip Styrofoam and choose a more sustainable filler or a smaller, lighter planter.