*sighs*
The refurbishment of the cottage was to restore a historical building and make it suitable for future use (IIRC it had been cottages, turned into something else and was being turned back into habitable buildings) and the cost included such minor things as getting modern power out to it - IIRC they had to put in a mini substation because the old powerlines were nowhere near up to the job for modern use*, and structural works.
Much of the rest of the cost was in using period correct workmanship and materials to retain the appearance.
It's odd how old buildings, especially ones that may be covered under "listed" status cost a lot to refurb, mind you any building that needs to be brought to modern standards after years of disuse/neglect will cost a lot.
Also IIRC the money was already due to be spent on them, all that happened was that when Harry was going to be living there they moved the timescale for the refurbishment up in the schedule so it would be ready for them rather than finding them somewhere else to live and then doing the cottages.
I suspect the works done specifically for Harry and his wife would barely have made a dent into that 3 million (it was going to be painted/wallpapered/carpeted and a new kitchen put in, they basically would have chosen the colours and accessories), but it does go to show that a nice bit of newspaper led outrage trumps the facts.
*This is not uncommon at all, it's just that normally it doesn't make the headlines. Many buildings from just the 70's don't necessarily have incoming power cabling that is up to modern standards (IIRC the modern supply allows for higher current), and if it's a distance from the main incoming lines and substation a mini station is used because it's more reliable. IIRC it can easily cost a couple of hundred thousand just for that.