County town near London, home to royalty (9)
I believe the answer is:
waterford
'county' is the definition.
(county of Ireland)
'town near london home to royalty' is the wordplay.
'town near london' becomes 'Watford' (town northwest of London).
'home to' indicates putting letters inside (some letters house or home others).
'royalty' becomes 'er' (abbreviation for Elizabeth Regina).
'watford' enclosing 'er' is 'WATERFORD'.
(Other definitions for waterford that I've seen before include "Port" , "crystal" , "Irish town" .)