Here’s How Real Estate Funds The Royal Family

UPDATE, SEPT. 8, 2022, 11:22 A.M. ET: This story was originally published on Jan. 14, 2020.

The decision by the Duke and Duchess of Sussex, Prince Harry and Meghan Markle, to step back from being full members of the British royal family has dominated headlines around the world. And real estate will play a central role in the debate about the couple’s future as part of the royal household.

One of the points to be thrashed out between the Sussexes and the Queen is how they achieve their stated aim of becoming “financially independent”. At the moment, they receive 5% of what The Wall Street Journal said is a £5M annual income from the Queen, and 95% from Prince Charles. And to a huge degree, apart from some undisclosed personal investments, the two senior royals derive their income from real estate. A whistle-stop tour of royal British history explains how and why.

The Crown Estate

The Crown Estate is a property company like perhaps no other in the world. It is made up of assets that are owned by the reigning British monarch, managed by an independent board, the profit from which goes to the UK Treasury. The Queen and royal family then receive a fixed percentage of the profit generated by the estate, called the Sovereign Grant. That figure is currently 25%, meaning that in 2018-2019 the queen received £82M. It was increased from 15% a few years ago to pay for repairs to a pretty famous piece of residential real estate, Buckingham Palace. The payment ratio gets reviewed every five years by the prime minister, the chancellor of the exchequer and the keeper of the privy purse, who manages the monarch’s finances.

The Crown Estate traces the ownership of its portfolio back to the time of William the Conqueror, King of England from 1066 to 1087. Through 700 years of upheaval that included the War of the Roses, the Reformation instigated by Henry VIII and the English Civil War, the British monarch retained ownership of the portfolio, using it to raise revenue to fund the operation of the state and regular wars, or giving away land to buy the support of the nobility.

In 1760, George III decided it would be a better deal if he swapped the income from the estate for a fixed annual payment from Parliament, called the Civil List. This arrangement lasted until 2011, when the Civil List and other public payments to the British monarchy were consolidated into the Sovereign Grant.

George III decided to make the swap partly because the Crown Estate had gradually become smaller and smaller. That is not the case today. The company’s portfolio stands at £14.3B, and includes the entirety of London’s famous Regent Street, the parkland around Windsor Castle, a portfolio of regional retail assets and a huge slug of the UK’s offshore wind sector: The Crown estate owns most of the UK seabed out to a distance of 12 nautical miles. Over the past 10 years the company has contributed £2.8B to the Treasury, and it made an 8% total return last year.

No inheritance tax is paid on the estate; when one monarch dies and the next takes over, the arrangement simply carries on.

The Duchy of Cornwall

There is the bank of Mum and Dad, and then there is getting 95% of your income from the Duchy of Cornwall. The Duchy was established by Edward III in 1337 in order to provide income for his son, Edward the Black Prince. It was the first English Duchy to be created, and is traditionally inherited by the Prince of Wales, the monarch’s eldest son. In that way, Prince Charles is Duke of Cornwall and the income from the Duchy is used to fund his life. When he took on the dukedom in 1973, as part of his feudal dues he received a pair of white gloves, gilt spurs and greyhounds, a pound of pepper and cumin, a bow, 100 silver shillings, wood for his fires and a salmon spear.

Of more use is the £931M of net assets that the Duchy had at the end of March, producing a net surplus Charles can draw on of £21M — he can only receive income from the portfolio, not receipts from asset sales.

The Duchy doesn’t own all of Cornwall, just a lot of it, and not all of its assets are in the county, in fact they are spread across 23 British counties. All told it owns 52,760 hectares of land, 2,360 hectares of woodland, £291M of commercial property, including the Oval cricket ground in London, and £53M of development land.

The Duchy of Lancaster

The Duchy of Lancaster is the private estate of the British sovereign, i.e. the Queen, and is older and smaller than Prince Charles’ Duchy of Cornwall.

The Duchy was created when Henry III gifted the baronial lands of Simon de Montfort to his son, Edmund, in 1265. The Duchy’s website does not record what Simon de Montfort thought of this. Henry then bundled this up with the land of another nobleman, Robert Ferrers, Earl of Derby, and some of his own land, and lo, the Duchy of Lancaster was up and running.

At the end of March the Duchy had assets of £549M, around half of which (52%) is in commercial property, with a further 9% in residential property. The Duchy produced income for the queen of £22M in 2019, two-thirds of which came from those commercial property assets.

Its largest commercial asset is the Savoy Estate, a London block that includes The Savoy hotel, although the Duchy does not own this. The Savoy forms the western boundary of the block, with The Strand to the north, the Embankment to the south and Somerset House to the east.