In private, the King is funding a luxury life for Beatrice and Eugenie

With its white picket fence and climbing roses, Ivy Cottage is by any standards a charming pied-à-terre for anyone looking to combine a prime central London location with a rare corner of quietude in one of the capital’s most expensive neighbourhoods.

Perhaps even more attractive for the three-bedroom property’s current lead tenant, Princess Eugenie of York, is the fact that the annual bill for renting the cottage nestled in the imperious grounds of Kensington Palace is being paid by her uncle, King Charles III.

An investigation by the National Audit Office (NAO), the UK’s public spending watchdog, has disclosed that both Eugenie and her sister, Princess Beatrice of York, are living in luxurious royal properties in central London where the cost of the lease is being met directly from the Privy Purse – the monarch’s private income derived from his Duchy of Lancaster estate, which last year netted the King some £27.4m to spend at his own discretion.

In the case of Beatrice, who is married to millionaire property developer Edoardo Mapelli Mozzi, the Sovereign is funding her use of a four-bedroom apartment in the private quarters of St James’s Palace, the 500-year-old residence built by Henry VIII which is considered the most senior of the royal palaces and the formal seat of the Royal Court.

Fresh scrutiny for York sisters

The revelation of Charles’s largesse to his nieces – likely to be worth many tens of thousands of pounds a year – raises fresh questions about the regal finances and the status of the daughters of Andrew Mountbatten-Windsor in the royal firmament.

Both princesses have spent recent months being buffeted by the fall-out from their parents’ disgrace in the wake of the stream of revelations related to the sex offender Jeffrey Epstein. The ex-Duke of York has retreated to the residence on the Sandringham Estate provided to him by his brother while his ex-wife, Sarah Ferguson, is keeping a low profile abroad.

While Eugenie, 36, and her 37-year-old elder sister retain their “HRH” royal titles – unlike both their parents – they are not working members of the Royal Family and as such are unusual in benefiting from subsidised living spaces within the patchwork of palaces, apartments and cottages set aside for the use of monarchy and its eco-system of aides and employees.

The NAO report – prosaically entitled “Investigation into Residential Property Arrangements with Members of the Royal Family” – notes that the monarchy provides seven residences to 11 members of the Windsor clan at no cost in return for their services as working royals.

Just four others – the York sisters and Prince and Princess Michael of Kent, who occupy a large apartment in Kensington Palace – have their rent paid by the King despite being non-working royals.

‘Royal Family is taking public for a complete ride’

Critics of the opacity of royal finances, in particular the lack of a detailed breakdown of how the monarch disperses his eight-figure income from the Duchy of Lancaster, immediately rounded on the NAO findings as evidence of a need for greater transparency.

Former Liberal Democrat minister Norman Baker described the watchdog’s findings as “outrageous”. He said: “There’s no way that non-working members of the Royal Family should be subsidised by the Duchy of Lancaster. The Royal Family is yet again taking the public for a complete ride.”

It is certainly unarguable that between Ivy Cottage, part of a collection of properties within Kensington Palace so chock-a-block with Windsors that it has been dubbed a “royal commune”, and St James’s Palace, the York princesses are afforded the sort of living arrangements that estate agents’ (and doubtless everyone else’s) dreams are made of.

While firmly off-limits to the public, various Instagram postings and videos by the princesses over recent years have revealed some of the tasteful decor and accoutrements that keep the King’s nieces in the manner to which they are accustomed.

Ivy Cottage features walls painted in deep shades of red and blue, accessorised with silver photo frames and original art. The St James’s Palace apartment reveals a more neutral treatment, including tasteful photographs of Italian landscapes.

Art gallery director Eugenie, who recently announced she is expecting her third child, moved into Ivy Cottage in 2018 after becoming engaged to her husband, Jack Brooksbank. When not in the cottage, the family live in Portugal, where Mr Brooksbank works as a marketing executive for a luxury property developer.

For her part, Beatrice, who recently founded her own boutique consultancy specialising in maximising the positive impact of technology, splits her time between St James’s Palace and a £3.5m house in the Cotswolds which she shares with “Edo” and their two children.

Substantial discount

What both princesses have in common, however, are the unique arrangements which apply to deciding just how much rent should be paid for the royal residences, and by whom.

It is understood by The i Paper that the current agreements relating to the princesses’ royal living quarters were drawn up during the reign of their grandmother, the late Queen Elizabeth, and have been carried over into their uncle’s reign.

The NAO report makes clear that rather than paying a premium for the privilege of living under armed police protection in some of the most splendid surroundings available to Londoners, the rent due on living quarters inhabited by non-working royals is, in reality, set at a substantial discount on market rates “due to properties being located within a secure cordoned area and requires tenants to have security clearance or vetting”.

For a number of years, this discount has been set by the Royal Household at a target rate 60 per cent of the market rate for comparable properties in surrounding areas.

The NAO investigation revealed that up until this year, the rents for Ivy Cottage and the St James’s Palace apartment were based on out-of-date valuations, calculated in 2018 and 2020 respectively.

In Eugenie’s case, the rental rate for Ivy Cottage has fluctuated both above and below the 60 per cent benchmark, standing at 50 per cent of the 2018 market value from 2020 to 2021 and ranging from 55 per cent in 2022 to 63 per cent in 2025.

The rent on Beatrice’s apartment was 60 per of the 2020 market value from 2020-2021 and ranged from 62 per cent to 68 per cent between 2022-2025.

The current rental rates are now 64 per cent of a 2026 open market valuation for Eugenie, and 68 per cent of a 2026 valuation for Beatrice. The NAO report said the difference between the previous valuations and the one carried out in March this year had been minimal.

‘Why should they get perks that no one else gets?’

Nonetheless, the findings will pose difficult questions for Buckingham Palace and the York sisters themselves as to just why their rent bills are being paid by the monarch, and whether such a position is sustainable.

As Mr Baker pithily put it: “They are non-working royals getting a very generous rental situation. It’s time to end all that. Why should they get living perks that no one else gets?”

Indeed, the NAO report comes amid a period of sustained flux and negative publicity for the princesses as their future status within the royal eco-system remains in the balance. Among the material released in the so-called Epstein files are exchanges showing that Sarah Ferguson brought her daughters to lunch with the financier in July 2009 – just five days after he had been released from prison for sex offences. There is no suggestion of wrongdoing and being named in the Epstein files is not an indication of wrongdoing.

In March, Eugenie stepped down as a patron of the charity Anti-Slavery International, a position she had held for seven years. Last month, the Charity Commission opened a case looking into the Anti-Slavery Collective, a separate charity co-founded by Eugenie, over concerns relating to its spending.

Royal aides have made clear that the King maintains a close bond with, and affection for, his nieces.

It is understood that they have been invited to this weekend’s wedding of their cousin, Peter Phillips, the marquee royal event of the year so far, due to be attended by senior royals including the King and Queen and the Prince and Princess of Wales.

Beatrice, who was last month pictured dancing on a table as she celebrated a friend’s birthday in Rome, and Eugenie may also yet feature in the traditional carriage procession at Royal Ascot later this month.

But while there is a desire to hold the princesses separate from the conduct of their parents, there is a nervousness in royal ranks that any proximity to the Epstein scandal and Mr Mountbatten-Windsor as he remains mired in linked police investigations could prove toxic for the royal brand. There have been some suggestions within royal circles that the York sisters could ultimately consider voluntarily giving up their HRH titles.

Could price of King’s generosity soon be too high?

For now, however, the more immediate question is whether the princesses’ subsidised living arrangements are sustainable.

One royal expert suggested that the ongoing agreement for the King to foot the bill for the two residences arose from a deal struck to maintain the sisters’ living arrangements in return for Mr Mountbatten-Windsor agreeing to leave his sprawling Royal Lodge home in Windsor.

The cost of such an arrangement would seem to be substantial.

Ivy Cottage and St James’s Palace sit in two of London’s most desirable and expensive boroughs. The NAO report does not disclose the sums being paid by the Privy Purse for individual properties, but for those without royal connections rents in the two boroughs for three or four-bedroom properties average between £3,500 and £5,500 per month.

For a monarchy more acutely sensitive than ever before to public perception of its rectitude, the price of such generosity may soon become too high. It is understood that the Palace keeps all financial arrangements under review.

Royal commentator Richard Fitzwilliams said: “It’s up to the King if he wants to fund the princesses’ living arrangements. It may well be an arrangement that continues.

“But I wouldn’t rule anything out in terms of [making Beatrice and Eugenie pay a rent]. A great deal more on their parents may come out. It’s going to be a matter of great sensitivity for the foreseeable future.”

In a statement, the Palace said the NAO findings underlined its commitment to transparency.

It said: “As the report notes, arrangements for properties managed by the Royal Household vary based on a number of factors to ensure residences are filled appropriately, depending on their location, tenants and purpose.”