Felipe, Letizia and her daughters live in a building close to Zarzuela - about 1 km from the main building. Supposedly, Zarzuela palace is the residency of the King, as Head of State in Spain. except the King doesn't live there.
Queen Sofia, his sister Irene and grandchildren wanting to move to Madrid before knowing what they want to do next, are the actual residents in Zarzuela. Frankly, more and more voices are raising against young royals using Zarzuela, a palace depending on national patrimony and taxes, as a hotel.