Prince and Princess Michael of Kent are to pay commercial-rate rent for their Kensington Palace apartment for the first time, Buckingham Palace has said.
The couple will be charged £120,000 a year from 2010 to remain at the royal residence in London, where they have been living rent free since 2002.
The Queen has been covering the £10,000 a month cost for her cousin and his wife to live at Kensington Palace.
The move follows demands by MPs on the Public Accounts Committee.
A statement from Buckingham Palace said in 2002 the Queen had agreed to pay the rent for the five-bedroom apartment in Kensington Palace from her own private income for up to seven years.
"The rent is paid to the grant-in-aid, provided by the government for the maintenance of the occupied royal palaces," said the statement.
"It has now been agreed that, from 2010, Prince and Princess Michael of Kent will remain at their apartment but pay the rent from their own funds."
From 2010 they would pay £120,000 a year, index linked, in rent for the home which also housed an office the prince used for his charitable work, said a Buckingham Palace spokeswoman.
Peppercorn rent
Kensington Palace has been their main home since the prince and princess sold their Gloucestershire country mansion of Nether Lypiatt in Bisley, Gloucestershire, in 2006.
The royal couple have been using the apartment since 1979 when the Queen made it available to them.
Before 2002, the prince and princess had been paying a "peppercorn" rent covering their utility bills for the apartment.
Prince Michael is a cousin to both the Queen and the Duke of Edinburgh.
He married his wife, then Baroness Marie-Christine von Reibnitz, in 1978.
Other minor royals living at Kensington Palace include the Duke and Duchess of Gloucester and the Duke and Duchess of Kent.
The Palace was also home to Princess Diana before her death in 1997.
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