Andrew Mountbatten-Windsor received an undisclosed rental income from sub-letting three cottages on the Royal Lodge estate that he leased from the Crown Estate, the public spending watchdog has revealed.
The National Audit Office (NAO) report also revealed that the King pays the rent for accommodation in royal palaces for Mountbatten-Windsor's daughters Princesses Eugenie and Beatrice, who are not working royals.
It is the first report into royal residences in 20 years and shows Mountbatten-Windsor and his family and staff had 12 properties, owned by the Crown Estate or the Royal Household.
A Buckingham Palace spokesman said the report was "in line with the Royal Household's commitment to transparency".
The watchdog report into royal residences shows that Princess Eugenie has a property in Kensington Palace and Princess Beatrice in St James's Palace.
They do not pay any rent for this central London accommodation, instead it is paid by the "privy purse", which is the monarch's personal money, to the Royal Household.
Both of the palaces are maintained by public funding, through the Sovereign Grant.
Norman Baker, former Home Office minister and critic of royal finances, said it was "outrageous to subsidise luxury accommodation" in this way and that the public was "being taken for a ride".
He said such arrangements should no longer be sustainable and that "deference is wearing thin indeed".
A Palace source said that the rent paid on these properties for non-working royals would cover any publicly-funded expenditure, so there would be no extra cost to the Sovereign Grant, which pays for the official duties of the monarchy.
The report does not specify how much rent is paid on the princesses' palace property, but the level is meant to be 60% of the open market rate.
The NAO report was prompted by the scandal surrounding Andrew Mountbatten-Windsor - and will be followed by an inquiry by MPs on the Public Accounts Committee.
It shows a collection of 12 properties used by Mountbatten-Windsor and his family.
Even though Mountbatten-Windsor left Royal Lodge earlier this year, moving to Sandringham in Norfolk, he still has the lease on Royal Lodge until October 2026.
There is no suggestion in the NAO report of any wrongdoing by Mountbatten-Windsor.
As well as the main building at Royal Lodge, there were another eight nearby properties, with Mountbatten-Windsor's lease allowing three of these cottages to be sub-let, which he did until April 2026.
The report does not say how much he received in rental income, but Palace sources suggest he rented the property to staff or retired staff and the amount was only enough to cover running costs.
Whatever the amount, it went to Mountbatten-Windsor rather than the Crown Estate, which would pay its profits back to the Treasury.
Mountbatten-Windsor had paid £7.5m for repairs when he took on the lease for Royal Lodge, and that meant that he did not have to pay a monthly rent.
He also had another lease for a property called East Lodge, which the BBC previously revealed was to be handed back to the Crown Estate.
His two daughters have homes in the Cotswolds and in Portugal as well as their royal properties in the palaces.
The report also reveals that the Crown Estate paid for repairs worth almost £400,000 before the Prince and Princess of Wales moved into their Windsor home at Forest Lodge.
Princess Michael of Kent, another non-working royal, also has a property in Kensington Palace which is paid for by the privy purse.
Eleven working royals have accommodation in the palaces without charge in exchange for their official duties.
These are: the King and Queen, the Princess Royal, Duke and Duchess of Edinburgh, Duke and Duchess of Gloucester, the Duke of Kent and Princess Alexandra. And the Prince and Princess of Wales have an apartment in Kensington Palace, as well as their Crown Estate property.
The report found 21 other royal post-holders, including 17 military knights, have accommodation without charge in the occupied palaces.
The NAO report doesn't make any judgements on value for money or draw any conclusions, but it is intended to provide information for MPs on the Public Accounts Committee.
"Our role is to set out the facts - and that's why this is an investigation that sets out the processes and the arrangements both from the Crown Estate and the Royal Household," said NAO director Lee Summerfield.
A Palace spokesman said it was "grateful" for the report which was "in line with the Royal Household's commitment to transparency".
"We hope that the findings will help correct, clarify or contextualise a number of points regarding royal properties," the spokesman added.
"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," he said.
A spokesperson for The Crown Estate, said: "The Crown Estate welcomes the National Audit Office's review which confirms its leases with members of the royal family were agreed in line with independent, professional advice and open market valuations."
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