Depends on the situation, but sometimes I do this:
Try to stay open with the person and tell them exactly that. Tell them you are so excited for them, but unfortunately these dates will probably will remain unfilled because they have been blocked off for their reservation. Tell them that in order to help, since you totally understand their position, you will relist the opening and will give them a partial refund if you are able to fill the dates (Mention you will have to offer the dates at a discounted rate to try to encourage last-minute bookings. I would also reserve a bit for your time dealing with the situation) If the dates fill, give them something back. Maybe 40-50%? If they don't, then they understood the risks of booking something with a strict cancellation policy so close to a due date.
ALSO- In your payout information, you can see promotions applied to the booking. If you offer a 10% discount for booking non-refundable bookings, I NEVER GIVE REFUNDS. You cannot expect to get a discount for non-refundable bookings and then get your money back if you cancel, that is dishonest and a lose-lose for hosts.
Also, depending on circumstances, you can offer to alter the dates if possible. That is better than a flat out loss to the guest. Even if the do not accept, at least you tried to work with them.