SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934


                    For the fiscal year ended December 31, 2003

[  ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934


               For the transition period from ____________ to ____________

                         Commission file number 0-14458

                    NATIONAL HOUSING  PARTNERSHIP REALTY FUND TWO
       (Exact name of small business issuer as specified in its charter)

            Maryland                                             52-1365317
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                         55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29601
                    (Address of principal executive offices)

                    Issuer's telephone number (864) 239-1000

           Securities registered under Section 12(b) of the Exchange Act:

                                      None

           Securities registered under Section 12(g) of the Exchange Act:

                        17,723 Limited Partnership Units
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  Partnership's  knowledge  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $1,312,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates computed by reference to the price at which the partnership units
were sold, or the average bid and asked prices of such  partnership  units as of
December 31, 2003.  No market  exists for the limited  partnership  units of the
Registrant, and, therefore, no aggregate market value can be determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such  markets;  litigation  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

                                     PART I

Item 1.     Business

National Housing  Partnership  Realty Fund Two, a Maryland  Limited  Partnership
(the "Partnership" or the  "Registrant"),  was formed under the Maryland Revised
Uniform  Limited  Partnership Act as of January 22, 1985. On March 15, 1985, the
Partnership  commenced offering 18,300 limited  partnership units, at a price of
$1,000 per interest,  through a public  offering  registered with the Securities
and Exchange  Commission (the  "Offering").  The Offering  terminated on May 22,
1985 with subscriptions for all 18,300 limited partnership units.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  and a publicly  held real estate  investment  trust  ("AIMCO"  and,
together  with its  subsidiaries  and  other  controlled  entities,  the  "AIMCO
Group"),  acquired  all of the  issued  and  outstanding  capital  stock  of NHP
Partners,  Inc., a Delaware  corporation ("NHP  Partners"),  and the AIMCO Group
acquired  all  of  the  outstanding   interests  in  NHP  Partners  Two  Limited
Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP Partners
owns all of the  outstanding  capital  stock  of the  National  Corporation  for
Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is the
general  partner of The  National  Housing  Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Partnership. As a result of these transactions, the AIMCO
Group acquired control of the general partner of the Partnership and, therefore,
may be deemed to have acquired control of the Partnership.

The  Partnership's  business is to hold  limited  partnership  interests  in two
limited partnerships  ("Local Limited  Partnerships") at December 31, 2003, each
of which owns and operates a multi-family rental housing property ("Properties")
which receives one or more forms of assistance from the Federal Government.  One
of the  partnerships  in which the  Partnership  had invested  sold its property
during 2003. NHP is the general  partner of the Local Limited  Partnerships  and
the Partnership is the principal  limited  partner.  As a limited  partner,  the
Partnership's  liability for  obligations of the Local Limited  Partnerships  is
limited to its investment,  and the Partnership  does not exercise  control over
the  activities  of the  Local  Limited  Partnerships  in  accordance  with  the
partnership  agreements.  See "Item 6.  Management's  Discussion and Analysis or
Plan of Operations" for  information  relating to the  Partnership's  rights and
obligations  to  make  additional   contributions  or  loans  to  Local  Limited
Partnerships.

The Partnership's investment objectives are to:

(1)   preserve and protect Partnership capital;

(2)   provide current tax benefits to Limited  Partners to the extent  permitted
      by law,  including,  but not limited to,  deductions that Limited Partners
      may use to offset otherwise taxable income from other sources;

(3)   provide   capital   appreciation   through   increase   in  value  of  the
      Partnership's   investments,   subject   to   considerations   of  capital
      preservation and tax planning; and

(4)   provide  potential cash  distributions  from sales or  refinancings of the
      Partnership's investments and, on a limited basis, from operations.

The  Partnership  does not have any  employees.  Services are  performed for the
Partnership by the General Partner and agents retained by the General Partner.

The  following  is a  schedule  of the  Properties  owned by the  Local  Limited
Partnerships in which the Partnership is a limited partner:


             SCHEDULE OF PROPERTIES OWNED BY LOCAL LIMITED PARTNERSHIPS
      IN WHICH NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO HAS AN INVESTMENT
<TABLE>
<CAPTION>

                                                                              Occupancy
                                                        Units Authorized     Percentage
                                       Financed,Insured    for Rental    for the Year Ended
   Property Name, Location    Number of  and Subsidized Assistance Under    December 31,
     and Partnership Name       Units        Under          Section 8       2003     2002

<S>     <C>    <C>    <C>    <C>    <C>    <C>
Caroline Arms                    (B)          (B)              (B)          (B)       (B)
  Jacksonville, Florida
  (Caroline Arms Limited
    Partnership)

Harold House                      80          (A)               80          100%     100%
  Jacksonville, Florida
  (Harold House Limited
    Partnership)

San Juan del Centro              150          (A)              150           99%      99%
  Boulder, Colorado
  (San Juan del Centro Limited
    Partnership)
</TABLE>

(A)   The mortgage is insured by the Federal  Housing  Administration  under the
      provisions of Section 236 of the National Housing Act.

(B) Property sold in February 2003.

Ownership Percentages

The  following  details the  Partnership's  ownership  percentages  of the Local
Limited  Partnerships  and  the  cost of  acquisition  of  such  ownership.  All
interests are limited  partner  interests.  Also included is the total  mortgage
encumbrance and notes payable and accrued  interest on each property for each of
the Local  Limited  Partnerships  as of  December  31, 2003  (dollar  amounts in
thousands):
<TABLE>
<CAPTION>

                                 NHP Realty
                                  Fund Two      Cost of                 Notes Payable
                                 Percentage    Ownership    Mortgage     and Accrued
Partnership                       Ownership     Interest      Notes      Interest (A)
<S>                                 <C>          <C>          <C>           <C>
Harold House L.P.                   94.5%        $ 364        $ 541         $1,746
San Juan del Centro L.P.            94.5%           799       1,166          3,955
</TABLE>

(A)   See "Item 6.  Management's  Discussion and Analysis or Plan of Operations"
      for further details.

Although each Local Limited  Partnership in which the  Partnership  has invested
owns an apartment complex which must compete with other apartment  complexes for
tenants,  government  mortgage  interest and rent  subsidies make it possible to
rent units to eligible tenants at below market rates. In general, this insulates
the Properties from market competition.

Regulation

General

Multifamily  apartment  properties  are subject to various laws,  ordinances and
regulations,  including regulations relating to recreational  facilities such as
swimming  pools,  activity  centers  and other  common  areas.  Changes  in laws
increasing  the potential  liability for  environmental  conditions  existing on
properties or increasing the restrictions on discharges or other conditions,  as
well  as  changes  in  laws  effecting  development,   construction  and  safety
requirements, may result in significant unanticipated expenditures,  which would
adversely  affect  the  properties'  cash flow  from  operating  activities.  In
addition,  future enactment of rent control or rent  stabilization laws or other
laws  regulating  multi-family  housing  may reduce  rental  revenue or increase
operating costs in particular markets.

Regulation of Affordable Housing

The  Federal  Housing   Administration  ("FHA")  has  contracted  with  the  two
subsidized  rental  projects  under  Section  8 of Title II of the  Housing  and
Community  Development  Act of 1974 to make housing  assistance  payments to the
Local  Limited  Partnerships  on behalf of qualified  tenants.  The terms of the
agreements are for one year with annual renewal options.

In 1997 and again in 1999,  Congress  enacted new ways to determine  rent levels
for properties  receiving HUD's rental  assistance under Section 8 of the United
States  Housing Act of 1937 ("Section 8") after the expiration of their original
Section 8 contracts.  This new legislation will affect 230 units, or 100% of the
units in which the Partnership has invested.  On October 27, 1997, the President
signed into law the Multifamily Assisted Housing Reform and Affordability Act of
1997 (the "1997 Housing Act").  Under the 1997 Housing Act,  certain  properties
assisted under expiring  Section 8 contracts and which have been receiving rents
deemed to be above  comparable  market  levels for  unassisted  properties,  and
financed  with  HUD-insured  mortgage  loans,  will  have,  upon the  renewal or
extension  of  Section  8  contracts,  rents  marked  to  market.  This  will be
accomplished  in  various  ways,  the goal  being to  reduce  Section 8 rents to
comparable  market  levels,  thereby  reducing  the  federal  Section  8 subsidy
obligation,  and (ideally) by simultaneously lowering, or eliminating,  required
debt  service  costs  (and  decreasing  operating  costs)  as  needed  to ensure
financial  viability at the reduced rent levels. The program also incorporates a
requirement  to  perform  any  repair  or  rehabilitation  deemed  necessary  by
depositing  funds to cover the first twelve month's work, and making  sufficient
monthly reserve  deposits to ensure work required in succeeding  years. In 1999,
Congress  enacted  legislation  (the "1999  Housing  Act") that  expanded on and
clarified  the  provisions  of  the  1997  Housing  Act,  including   permitting
properties whose Section 8 rents were below comparable  market rents to increase
their Section 8 rents to market.

The 1997 and 1999  Housing  Acts  (together,  the  "Housing  Acts")  permit  the
retention of project  based  Section 8 contracts  for most  properties in rental
markets  with a limited  supply of  affordable  housing or where the tenants are
particularly  vulnerable  populations  including the elderly,  disabled or large
families.  In rental markets without a limited supply of affordable housing, the
Housing Acts provide for phasing out project  based  subsidies,  converting  the
assistance to tenant based assistance or vouchers.  Under a tenant based system,
rental  vouchers  would be issued to  qualified  tenants who then could elect to
reside at  properties  of their  choice,  including  the  property in which they
currently  reside.   Voucher  rent  levels  are  established  by  local  housing
authorities  under  guidelines set by HUD. While the Partnership does not expect
the provisions of the Housing Acts to result in a significant  number of tenants
relocating from the properties  owned by the Local Limited  Partnerships,  there
can be no  assurance  that  the  new  legislation  will  not  significantly  and
adversely  affect  the  operations  of  the  properties  of  the  Local  Limited
Partnerships.

The following  table  indicates the year within which the Section 8 rent subsidy
contracts expire:

                                      Subsidized Units       Subsidized Units
                                        Expiring as a          Expiring as a
                       Number of     Percentage of Total       Percentage of
                         Units        Subsidized Units          Total Units

2004                      230               100%                   100%

All of the units which  receive rent  subsidies  from  Section 8 have  contracts
which expire during the year ending  December 31, 2004. The Housing Acts provide
for  several  options  under which a Local  Limited  Partnership  may elect,  as
appropriate,  to renew its  Section 8  contracts:  (1)  marking  rents up to the
comparable market rent, if current rents are below market; (2) renewing rents at
the current level,  if the level does not exceed  comparable  market rents,  and
receiving an operating cost adjustment factor (an "OCAF") or a budget based rent
increase,  as long as the  rents do not  exceed  comparable  market  rents;  (3)
marking rents down to comparable  market rents;  (4) marking their rents down to
an  "exception  rent" level,  when  comparable  market rents would be too low to
permit  continued  operation of the property  under the Section 8 program,  even
with full debt  restructuring;  or (5) opting out of the section 8 program.  For
properties   assisted  by  Section  8,  but  not  subject  to  these  provisions
(including,  but not limited to,  properties  which do not have  underlying  HUD
insured  mortgages,  or which have been financed  through  certain state housing
finance agency or bond-financed  mortgage programs),  rents will be continued at
current  levels,  plus  an OCAF or (in  some  instances)  a  budget  based  rent
increase.  In addition,  properties can opt out of the Section 8 program only if
very strict notice requirements have been met, including a requirement that HUD,
the tenants,  and the local  governing  body, be given twelve months notice of a
Local  Limited  Partnership's  intention  to opt  out of the  program  prior  to
contract termination.

Each of the options  requires an application to HUD, and, to a greater or lesser
extent,  the  fulfillment  of certain  procedural  submission  requirements  and
financial   requirements,   which  must  be  weighed  in  connection   with  the
determination of which option to select.

The Section 8  requirements  are separate  from the  requirements  governing the
underlying  HUD-insured  mortgage  loans,  and any  other  HUD,  state  or local
requirements, all of which must be fulfilled,  irrespective of the option chosen
with regard to the continuation of Section 8 participation.

HUD Approval and Enforcement

The properties owned by the Partnership are subject to regulations by HUD. Under
its regulations,  HUD reserves the right to approve the owner and the manager of
HUD-insured and HUD-assisted  properties,  as well as their  "principals"  (e.g.
general  partners,  stockholders  with 10% or  greater  interest,  officers  and
directors) in connection  with the acquisition of a property,  participation  in
HUD programs or the award of a management  contract.  This  approval  process is
commonly  referred to as "2530  Clearance."  HUD  monitors  the  performance  of
properties with HUD-insured  mortgage loans.  HUD also monitors  compliance with
applicable  regulations,  and takes  performance  and compliance into account in
approving the acquisition of management of HUD-assisted properties.

Management  believes that the  Partnership's  properties are covered by adequate
fire,  flood and property  insurance  provided by reputable  companies  and with
commercially reasonable deductibles and limits.

Item 2.     Properties

See "Item 1. Business" for the real estate owned by the Partnership  through the
ownership of limited partnership interests in Local Limited Partnerships.

Item 3.     Legal Proceedings

The  Partnership  is unaware of any pending or  outstanding  litigation  matters
involving  it or the  underlying  investment  properties  of the  Local  Limited
Partnerships in which the  Partnership  invests that are not of a routine nature
arising in the ordinary course of business.

Item 4.     Submission of Matters to a Vote of Security Holders

During the quarter ended December 31, 2003, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.

                                     PART II

Item 5.  Market  for  the   Registrant's   Partnership   Interests  and  Related
         Partnership Matters

      (a)   Units in the Partnership were sold through a public offering.  There
            is no established market for resale of the units in the Partnership.
            Accordingly,  an investor may be unable to sell or otherwise dispose
            of his interest in the Partnership.

      (b)   As of December  31,  2003,  there were 1,101  registered  holders of
            17,723  limited  partnership  units (in  addition to 1133  Fifteenth
            Street Two  Associates  - See "Item 7.  Financial  Statements - Note
            1").  During  the year  ended  December  31,  2003,  320 units  were
            abandoned.

      (c)   No cash  dividends  or  distributions  have been  declared  from the
            inception of the Partnership through December 31, 2003.

Item 6.     Management's Discussion and Analysis or Plan of Operations

This item should be read in conjunction with the financial  statements and other
items contained elsewhere in this report.

Liquidity and Capital Resources

As of December  31,  2003,  the  Partnership  retained an interest in two of its
original  twenty-one  Local Limited  Partnerships.  The  properties in which the
Local Limited Partnerships have invested receive one or more forms of assistance
from the  Federal  Government.  As a  result,  the Local  Limited  Partnerships'
ability to transfer funds either to the  Partnership or among  themselves in the
form of cash distributions,  loans, or advances is generally restricted by these
government-assistance    programs.   These   restrictions   could   impact   the
Partnership's  ability  to meet  its cash  obligations  given  the low  level of
reserves at the Partnership level. The General Partner monitors  developments in
the area of legal and  regulatory  compliance  and is studying new federal laws,
including  the  Sarbanes-Oxley  Act of  2002.  The  Sarbanes-Oxley  Act of  2002
mandates or suggests  additional  compliance measures with regard to governance,
disclosure,  audit and other areas.  In light of these changes,  the Partnership
expects  that it will incur higher  expenses  related to  compliance,  including
increased legal and audit fees.

Distributions received in excess of investment in Local Limited Partnerships and
distributions   from  Local  Limited   Partnerships   typically   represent  the
Partnership's  proportionate share of the excess cash available for distribution
from the Local Limited Partnerships. As a result of the use of the equity method
of  accounting  for the  Partnership's  investments,  investments  in all of the
remaining  Local Limited  Partnerships  have been reduced to zero as of December
31, 2003. For these  investments,  cash  distributions  received are recorded in
income  as  distributions  received  in excess of  investment  in Local  Limited
Partnerships.  If these investments had not been reduced to zero,  distributions
received would be recorded as distributions  from Local Limited  Partnerships in
the  statements of cash flows and would reduce the  Partnership's  investment on
the balance  sheet.  During the year ended  December 31, 2003,  the  Partnership
received  a  distribution  of   approximately   $1,113,000   consisting  of  the
Partnership's  share of net  proceeds  from the sale of  Caroline  Arms  Limited
Partnership's   investment  property.  In  addition,  the  Partnership  received
approximately  $3,000 from Harold  House  Limited  Partnership  in  repayment of
advances  and  accrued  interest  deemed by the  Partnership  as  unlikely to be
collected  and  treated  as  an  additional  investment  in  the  Local  Limited
Partnership.  This  repayment  is  included  as  a  distribution  in  excess  of
investment  in Local  Limited  Partnerships  in the  accompanying  statement  of
operations.  During the year ended December 31, 2002, the Partnership received a
distribution of approximately  $43,000  comprised of the final proceeds from the
2001 sale of Windsor  Apartments.  The receipt of distributions in the future is
dependent upon the operations of the underlying  properties of the Local Limited
Partnerships  to generate  sufficient  cash for  distribution in accordance with
applicable HUD regulations.

Cash and cash  equivalents  was  approximately  $53,000  at  December  31,  2003
compared to less than $1,000 at December 31, 2002. The increase of approximately
$53,000  was due to  approximately  $1,246,000  of cash  provided  by  investing
activities  largely offset by approximately  $1,180,000 and $13,000 of cash used
in operating and financing activities,  respectively. Cash provided by investing
activities  consisted of distributions  received from Local Limited Partnerships
and the  repayment  of  advances  to Local  Limited  Partnerships.  Cash used in
financing  activities consisted of payments on advances from the General Partner
partially  offset by advances  received from the General  Partner.  Cash used in
operating  activities consisted of payments of administrative and reporting fees
to the General  Partner,  non-resident  income tax  withholding  to the state of
North Carolina on behalf of investors net of  reimbursements  received from some
of the investors,  operating  expenses and interest on advances from the General
Partner partially offset by the receipt of interest on advances to Local Limited
Partnership  previously deemed uncollectible.  The ability of the Partnership to
meet its on-going  cash  requirements  in excess of cash on hand at December 31,
2003 is  dependent  upon the  future  receipt  of  distributions  from the Local
Limited Partnerships or proceeds from sales or refinancing of one or more of the
underlying  properties  of  the  Local  Limited  Partnerships.  There  can be no
assurance  that future  distributions  will be  adequate to fund the  operations
beyond the current  year.  The  Partnership's  only other form of  liquidity  is
advances  from the  General  Partner.  During the year ended  December  31, 2003
approximately  $60,000  of working  capital  advances  were made by the  General
Partner to the  Partnership.  The Partnership  repaid advances of  approximately
$73,000  during the year ended  December  31,  2003.  The General  Partner  will
evaluate  advancing the Partnership  additional  funds as such funds are needed,
but is in no way legally obligated to make such advances.

Net  cash  used  in  operations  for  the  year  ended  December  31,  2003  was
approximately  $1,180,000  compared to approximately  $51,000 for the year ended
December 31, 2002.  The increase in cash used in  operations is primarily due to
the payment of administrative  and reporting fees payable to the General Partner
from the  Partnership's  portion of proceeds  received from the sale of Caroline
Arms noted below.

On February 13, 2003  Caroline  Arms  Limited  Partnership  sold its  investment
property to an  unaffiliated  third party for  $4,600,000.  After paying closing
costs, the net proceeds were used to repay the mortgage encumbering the property
along with other liabilities of the property and the Local Limited  Partnership.
In  accordance  with an  agreement  reached with the note holder of the deferred
acquisition  note 60% or  approximately  $1,670,000  of the  remainder  was paid
against the  principal of this note and 40%, or  approximately  $1,113,000,  was
distributed  to the  Partnership.  An  additional  $198,000  was received by the
Partnership  for the repayment of advances to Caroline Arms Limited  Partnership
which had previously been deemed unlikely to be collected and were treated as an
additional  investment in the Local Limited  Partnership.  The funds received by
the Partnership were used to pay certain of its liabilities.  As of December 31,
2003, the Local Limited Partnership has been completely liquidated.

Harold House and San Juan Del Centro Limited  Partnerships both have notes which
were executed by the respective  Local Limited  Partnerships  with the seller as
part of the  acquisition of the property by the Local Limited  Partnership.  The
notes are  nonrecourse  notes secured by a security  interest in all Partnership
interests  in  the  Local  Limited  Partnership  and  are  subordinated  to  the
respective mortgage notes on each property for as long as the mortgage notes are
insured by HUD. Any  payments  due from project  income are payable from surplus
cash,  as  defined  by  the  HUD  Regulatory  Agreement.   Neither  the  Limited
Partnership  nor any partners  thereof,  present or future,  assume any personal
liability for the payment of the notes. The notes were due November 15, 1999 and
December 20, 1999,  respectively.  Each note is in default and the Local Limited
Partnership interests are subject to potential foreclosure.  Continuation of the
Local Limited  Partnerships'  operations in the present form is dependent on its
ability to extend the maturity date of their  respective  notes,  or to repay or
refinance  their note. The financial  statements do not include any  adjustments
which might  result from the  outcome of this  uncertainty.  Each of these Local
Limited Partnerships are actively attempting to sell their net assets.

The General Partner advanced the Partnership  approximately  $60,000 and $41,000
during the years ended  December  31, 2003 and 2002,  respectively.  Interest is
charged  on  borrowings  at the JP Morgan  Chase  prime  interest  rate plus 2%.
Interest  expense  was less than $1,000 and  approximately  $1,000 for the years
ended  December  31,  2003 and 2002,  respectively.  During  2003 and 2002,  the
Partnership repaid approximately $73,000 and $38,000,  respectively, of advances
from the General Partner.

As of December 31, 2003, the Partnership owes the General Partner  approximately
$437,000 for administrative and reporting services performed. The payment of the
unpaid  administrative  and reporting fees will most likely  result,  if at all,
from the sale or refinancing  of the underlying  properties of the Local Limited
Partnerships  rather than through recurring  operations.  The Partnership repaid
approximately  $933,000 to the General  Partner from the proceeds of the sale of
the property  owned by Caroline  Arms Limited  Partnership  as discussed  above.
There were no such payments during the year ended December 31, 2002.

Results of Operations

The  Partnership  originally  invested  as a limited  partner  in Local  Limited
Partnerships which operated  twenty-one rental housing  properties.  At December
31, 2003,  the  Partnership  continued to hold an interest in two Local  Limited
Partnerships.  To the extent  the  Partnership  still has a carrying  basis in a
respective Local Limited  Partnership,  results of operations are  significantly
impacted  by the  Partnership's  share of the  profits  or  losses  in the Local
Limited  Partnership.  These profits or losses include  depreciation and accrued
note  payable  interest  expense  which are  noncash in nature.  However,  as of
December 31, 2003,  the  Partnership  had no carrying basis in its investment in
either of the Local Limited Partnerships and, therefore, reflected no results of
operations  for  its  share  of  profits  or  losses  for  these  Local  Limited
Partnerships.

The  Partnership had net income of  approximately  $1,219,000 for the year ended
December 31, 2003, compared to a net loss of approximately  $80,000 for the year
ended December 31, 2002. Net income per unit of limited partnership interest was
$66.23 for the year ended  December 31, 2003 compared to a net loss of $4.30 per
limited  partnership  unit for the year ended December 31, 2002. The increase in
net  income  for  the  year  ended  December  31,  2003 is  attributable  to the
recognition  of  approximately  $1,244,000  of  profits  from the Local  Limited
Partnerships  and interest  received on advances to Local Limited  Partnerships.
Both amounts were a result of the sale of the  property  owned by Caroline  Arms
Limited  Partnership as noted above. The profits recognized are comprised of the
Partnership's  share of the  profits of Caroline  Arms  Limited  Partnership  of
approximately  $2,779,000  offset  against  prior years' net losses not taken of
approximately  $1,561,000.  The  Partnership  did  not  recognize  approximately
$104,000 of its allocated  share of losses from two Local  Limited  Partnerships
for the year ended December 31, 2003, as the Partnership's net carrying basis in
these Local Limited  Partnerships  had been reduced to zero.  The  Partnership's
share of losses  from the Local  Limited  Partnerships,  if not  limited  to its
investment account balance,  would have decreased  approximately $82,000 between
periods.  The  decrease is  primarily  due to increases in both rental and other
income at one of the properties and a slight  decrease in total expenses at both
of the properties owned by the two remaining Local Limited Partnerships.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003, and with respect to variable interests held before February 1,
2003,  FIN 46 will  apply to  financial  statements  for  periods  ending  after
December 15, 2004.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in unconsolidated  partnerships that may be deemed variable interest
entities under the provisions of FIN 46. The  Partnership has not yet determined
the anticipated  impact of adopting FIN 46 for its  partnership  agreements that
existed as of January 31, 2003. However, FIN 46 may require the consolidation of
the  assets,   liabilities  and  operations  of  certain  of  the  Partnership's
unconsolidated  partnership  investments.  Although  the  Partnership  does  not
believe  the full  adoption  of FIN 46 will  have an impact  on cash  flow,  the
Partnership cannot make any definitive  conclusion on the impact on net earnings
until it completes its evaluation,  including an evaluation of the Partnership's
maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely  deferred the provisions of SFAS 150 for finite life  partnerships.
The  adoption  of SFAS 150 did not have a material  impact on the  Partnership's
results of operations taken as a whole.


Item 7.     Financial Statements

NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO

LIST OF FINANCIAL STATEMENTS

      Report of Ernst & Young LLP, Independent Auditors

      Balance Sheet - December 31, 2003

      Statements of Operations - Years ended December 31, 2003 and 2002

      Statements of Changes in Partners' Capital  (Deficiency)  -  Years  ended
      December 31, 2003 and 2002

      Statements of Cash Flows - Years ended December 31, 2003 and 2002

      Notes to Financial Statements



<PAGE>


                          Independent Auditors' Report



To The Partners of
National Housing Partnership Realty Fund Two
Indianapolis, Indiana


We have audited the accompanying  balance sheet of National Housing  Partnership
Realty Fund Two (the  Partnership)  as of  December  31,  2003,  and the related
statements of operations,  partners'  capital  (deficiency),  and cash flows for
each of the two years in the period ended  December 31,  2003.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.  The financial  statements of this Local  Limited  Partnership  were
audited  by other  auditors  whose  report  has been  furnished  to us,  and our
opinion,  insofar as it relates to the amounts  included for this Local  Limited
Partnership, is based solely on the report of other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We  believe  that our  audits  and the  report of other  auditors
provide a reasonable basis for our opinion.

In our opinion,  based upon our audits,  the  financial  statements  referred to
above  present  fairly,  in all material  respects,  the  financial  position of
National  Housing  Partnership  Realty Fund Two at December  31,  2003,  and the
results  of its  operations  and its cash flows for each of the two years in the
period  ended  December  31,  2003  in  conformity  with  accounting  principles
generally accepted in the United States.

As discussed in Note 8 to the financial statements,  the due dates of certain of
the Local Limited  Partnership's notes payable have expired, and therefore,  the
notes are in  default.  These  conditions  raise  substantial  doubt about their
ability to continue as a going concern.  The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.



                                                               Ernst & Young LLP

Indianapolis, Indiana
March 7, 2004


<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                                  Balance Sheet
                                December 31, 2003
                        (in thousands, except unit data)



                                     ASSETS
Cash and cash equivalents                                            $ 53
Investments in and advances to Local Limited
  Partnerships (Note 2)                                                 --
Receivables - limited partners                                         182
                                                                     $ 235


                    LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Liabilities:
  Administrative and reporting fees payable to
   General Partner (Note 3)                                         $  437

Partners' capital (deficiency):
  General Partner                                                      640
  Original Limited Partner                                            (170)
  Other Limited Partners - 17,723 investment units                    (672)
                                                                      (202)
                                                                     $ 235


                   See Accompanying Notes To Financial Statements


<PAGE>


                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Operations
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                                                   2003         2002
REVENUES:
<S>                                                      <C>     <C>            <C>
  Share of profits from Local Limited Partnerships (Note 2)      $ 1,218        $ --
  Interest received on advances to Local Limited Partnerships
    (Note 2)                                                          68           --
                                                                   1,286           --
COSTS AND EXPENSES:
  Administrative and reporting fees to General Partner
    (Note 3)                                                          13           20
  Other operating expenses                                            83           59
  Interest on advances from the General Partner                       --            1
                                                                      96           80

Income (loss) from partnership operations                          1,190          (80)
Distribution in excess of investment in Local Limited
  Partnerships (Note 2)                                               29           --

NET INCOME (LOSS)                                                $ 1,219       $ (80)

ALLOCATION OF NET INCOME (LOSS):
  General Partner                                                  $ 12         $ (1)
  Original Limited Partner                                            12           (1)
  Other Limited Partners                                           1,195          (78)

                                                                 $ 1,219       $ (80)
PER LIMITED PARTNERSHIP UNIT:
  NET INCOME (LOSS) PER OTHER LIMITED PARTNERSHIP UNIT           $ 66.23      $ (4.30)


                   See Accompanying Notes To Financial Statements

</TABLE>

<PAGE>


                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                    Statements of Partners' Capital (Deficiency)
                        (in thousands, except unit data)
<TABLE>
<CAPTION>

                                                     1133
                                   The National   Fifteenth       Other
                                     Housing      Street Two     Limited
                                   Partnership    Associates     Partners        Total

Capital (deficiency) at
<S>       <C>                         <C>           <C>          <C>            <C>
  January 1, 2002                     $ 629         $ (181)      $(1,789)       $(1,341)

Net loss for the year ended
  December 31, 2002                       (1)           (1)          (78)           (80)

Capital (deficiency) at
  December 31, 2002                      628          (182)       (1,867)        (1,421)

Net income for the year ended
  December 31, 2003                       12            12         1,195          1,219

Capital (deficiency) at               $ 640         $ (170)       $ (672)       $ (202)
  December 31, 2003

Percentage interest at
  December 31, 2003 and 2002              1%            1%            98%          100%
                                          (A)           (B)           (C)


(A)   General Partner

(B)   Original Limited Partner

(C)   Consists of 17,723 and 18,043  investment  units at December  31, 2003 and
      2002, respectively. See "Note 4" for further information.


                   See Accompanying Notes To Financial Statements
</TABLE>

<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                    Years Ended December 31,
                                                                      2003           2002
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                   <C>            <C>
  Interest received on advances to Local Limited Partnerships         $ 68           $ --
  Payment of administrative and reporting fees                         (933)             --
  Payment of non-resident income tax withholding to the
   state of North Carolina on behalf of limited partners               (182)             --
  Operating expenses paid                                              (132)            (51)
  Payment of interest on advances payable to General Partner             (1)             --
        Net cash used in operating activities                        (1,180)            (51)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Distributions from Local Limited Partnerships                       1,113              43
  Repayment of advances to Local Limited Partnership                    133              --
        Net cash provided by investing activities                     1,246              43

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of advances from General Partner                            (73)            (38)
  Proceeds from advances from General Partner                            60              41
        Net cash (used in) provided by financing activities             (13)              3

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     53              (5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                         --               5

CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $ 53           $ --

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH USED IN
  OPERATING ACTIVITIES:
   Net income (loss)                                                $ 1,219          $ (80)
   Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
      Share of profits from Local Limited Partnerships               (1,218)             --
      Distributions in excess of investment in Local Limited
        Partnerships                                                    (29)             --
      Changes in operating assets and liabilities:
        (Decrease) increase in accrued interest on advances
          from General Partner                                           (1)              1
        (Decrease) increase in administrative and reporting
          fees payable                                                 (920)             20
        Increase in receivables - limited partners                     (182)             --
        (Decrease) increase in other accrued expenses                   (49)              8
        Total adjustments                                            (2,399)             29

Net cash used in operating activities                               $(1,180)         $ (51)

                   See Accompanying Notes To Financial Statements

</TABLE>

<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                          Notes to Financial Statements
                                December 31, 2003


(1) SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

National  Housing   Partnership  Realty  Fund  Two  (the  "Partnership"  or  the
"Registrant") is a limited partnership  organized under the laws of the State of
Maryland under the Maryland  Revised Uniform Limited  Partnership Act on January
22,  1985.  The  Partnership  was formed for the  purpose of raising  capital by
offering and selling  limited  partnership  units and then  investing in limited
partnerships ("Local Limited Partnerships"),  each of which owns and operates an
existing  rental housing  project which is financed  and/or operated with one or
more forms of rental assistance or financial assistance from the U.S. Department
of Housing and Urban Development ("HUD").

The General  Partner was  authorized  to raise  capital for the  Partnership  by
offering  and  selling  to  additional  limited  partners  not more than  18,300
interests at a price of $1,000 per interest.  During 1985, the sale of units was
closed after the sale of 18,300 units to limited partners.

During 1985, the  Partnership  acquired 94.5% (98% with respect to allocation of
losses)  of the  limited  partnership  interests  in  twenty-one  Local  Limited
Partnerships.  At December  31,  2003,  the  Partnership  retained an  ownership
interest in two of the original Local Limited Partnerships.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  and a publicly  held real estate  investment  trust  ("AIMCO"  and,
together  with its  subsidiaries  and  other  controlled  entities,  the  "AIMCO
Group"),  acquired  all of the  issued  and  outstanding  capital  stock  of NHP
Partners,  Inc., a Delaware  corporation ("NHP  Partners"),  and the AIMCO Group
acquired  all  of  the  outstanding   interests  in  NHP  Partners  Two  Limited
Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP Partners
owns all of the  outstanding  capital  stock  of the  National  Corporation  for
Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is the
general  partner of The  National  Housing  Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Partnership. As a result of these transactions, the AIMCO
Group has  acquired  control  of the  general  partner of the  Partnership  and,
therefore, may be deemed to have acquired control of the Partnership.

The Original  Limited  Partner of the  Partnership is 1133 Fifteenth  Street Two
Associates,  whose  limited  partners were key employees of NCHP at the time the
Partnership was formed and whose general partner is NHP.

Investments  in Local  Limited  Partnerships  are accounted for using the equity
method and thus are  carried at cost less the  Partnership's  share of the Local
Limited  Partnerships'  losses and distributions plus the Partnership's share of
the Local Limited  Partnerships' income (see "Note 2"). An investment account is
maintained for each of the limited  partnership  investments  and losses are not
taken once an investment  account has been decreased to zero. Cash distributions
are limited by the Regulatory  Agreements between the Local Limited Partnerships
and HUD to the extent of surplus cash as defined by HUD.  Distributions received
from Local LimitedPartnerships in which the Partnership's investment account has
been  decreased  to zero are recorded as revenue in the year  received.  Once an
investment account has been reduced to zero, profits reported by a Local Limited
Partnership  are not  recognized  by the  Partnership  until such profits  equal
losses not recognized plus distributions  received and previously  recognized as
revenue. Advances to Local Limited Partnerships are included with Investments in
Local  Limited  Partnerships  to the extent that the advances are not  temporary
advances of working capital.

Cash and Cash Equivalents

The  Partnership  considers all highly liquid debt  instruments  purchased  with
original maturities of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About
Fair Value of Financial  Instruments",  as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial Instruments",
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not  recognized  in the  balance  sheet,  when it is  practicable  to
estimate that value and excessive  costs would not be incurred.  To estimate the
fair value of the  balances  due to the General  Partner  and  accrued  interest
thereon,  excessive costs would be incurred and, therefore, no estimate has been
made.  The  Partnership  believes  that the  carrying  value of other assets and
liabilities   reported  on  the  balance  sheet  that  require  such  disclosure
approximate fair value.

Segment Reporting

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information"  established standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments in interim financial reports. It also established standards for related
disclosures  about products and services,  geographic areas and major customers.
Under the criteria  established  by SFAS No. 131, the  Partnership  has only one
reportable segment.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003, and with respect to variable interests held before February 1,
2003,  FIN 46 will  apply to  financial  statements  for  periods  ending  after
December 15, 2004.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in unconsolidated  partnerships that may be deemed variable interest
entities under the provisions of FIN 46. The  Partnership has not yet determined
the anticipated  impact of adopting FIN 46 for its  partnership  agreements that
existed as of January 31, 2003. However, FIN 46 may require the consolidation of
the  assets,   liabilities  and  operations  of  certain  of  the  Partnership's
unconsolidated  partnership  investments.  Although  the  Partnership  does  not
believe  the full  adoption  of FIN 46 will  have an impact  on cash  flow,  the
Partnership cannot make any definitive  conclusion on the impact on net earnings
until it completes its evaluation,  including an evaluation of the Partnership's
maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely  deferred the provisions of SFAS 150 for finite life  partnerships.
The  adoption  of SFAS 150 did not have a material  impact on the  Partnership's
results of operations taken as a whole.

(2) INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

During 1985, the Partnership  acquired a 94.5% limited partnership interest (98%
with respect to allocation of losses) in twenty-one Local Limited  Partnerships.
At December 31, 2003, the Partnership continues to hold an interest in two Local
Limited  Partnerships:  San Juan del Centro Limited Partnership and Harold House
Limited  Partnership.  On February 13, 2003,  Caroline Arms Limited  Partnership
sold its  investment  property to an  unaffiliated  third party for  $4,600,000.
After paying  closing  costs,  the net proceeds  were used to repay the mortgage
encumbering  the property  along with other  liabilities of the property and the
Local Limited Partnership. In accordance with an agreement reached with the note
holder of the deferred  acquisition note 60% or approximately  $1,670,000 of the
remainder was paid against the principal of this note and 40%, or  approximately
$1,113,000,  was  distributed  to the  Partnership.  An additional  $198,000 was
received by the  Partnership  for the  repayment  of  advances to Caroline  Arms
Limited  Partnership  which had previously  been deemed unlikely to be collected
and were treated as an additional  investment in the Local Limited  Partnership.
The  funds  received  by  the  Partnership  were  used  to  pay  certain  of its
liabilities.  As of December 31, 2003,  the Local Limited  Partnership  has been
completely liquidated.  During the year ended December 31, 2002, the Partnership
received its share of the final  distribution of Windsor  Apartments  Associates
Limited Partnership and the Local Limited Partnership was liquidated.

Notes payable were executed by the Local  Limited  Partnerships  with the former
owners  as  part of the  acquisition  of the  properties  by the  Local  Limited
Partnerships.  These notes bear simple interest at rates of 9% or 10% per annum.
The  notes  are  nonrecourse  notes  secured  by  a  security  interest  in  all
partnership  interests  in the  respective  Local  Limited  Partnership  and are
subordinated to the respective mortgage note for as long as the mortgage note is
insured by HUD.  Any  payments  due from  project  income are  payable  from the
respective  Local  Limited   Partnership's  surplus  cash,  as  defined  by  the
respective HUD Regulatory Agreement. The notes may be repaid in whole or in part
at any time without penalty.  Neither the respective  Local Limited  Partnership
nor any partner thereof,  present or future,  assumes any personal liability for
the  payment  of these  notes.  Each note is in  default  and the Local  Limited
Partnership interests are subject to potential foreclosure.  Continuation of the
Local Limited  Partnerships'  operations in the present form is dependent on its
ability to extend the maturity date of their  respective  notes,  or to repay or
refinance  their note. The financial  statements do not include any  adjustments
which might  result from the  outcome of this  uncertainty.  Each of these Local
Limited Partnerships are actively attempting to sell their net assets.

These notes matured as follows (in thousands):
<TABLE>
<CAPTION>

Local Partnership                            Due Date   Note Amount  Accrued Interest

<S>                                          <C>   <C>     <C>            <C>
Harold House Limited Partnership             11/15/99      $ 599          $1,147
San Juan Del Centro Limited Partnership      12/20/99       1,458          2,497

      Total Due and Delinquent                             $2,057         $3,644
</TABLE>

Since the Partnership,  as a limited partner, does not exercise control over the
activities of the Local Limited  Partnerships in accordance with the partnership
agreements,  these investments are accounted for using the equity method.  Thus,
the  investments are carried at cost less the  Partnership's  share of the Local
Limited  Partnerships'  losses and distributions plus the Partnership's share of
Local  Limited  Partnerships'  income.  However,  since the  Partnership  is not
legally liable for the obligations of the Local Limited Partnerships, and is not
otherwise committed to provide additional support to them, it does not recognize
losses once its investment in each of the individual Local Limited  Partnerships
reduced for its share of losses and cash  distributions,  reaches zero.  Once an
investment  account has been reduced to zero, income reported by a Local Limited
Partnership is not recognized by the Partnership until such income equals losses
not recognized plus distributions received and previously recognized as revenue.
As a result,  the  Partnership  did not  recognize  approximately  $104,000  and
$325,000 of losses from two and three Local Limited Partnerships during 2003 and
2002,  respectively.  During the year ended December 31, 2003, the Partnership's
share of profits  from  Caroline  Arms  Limited  Partnership  was  approximately
$2,779,000  offset  against  prior  years  losses  not  taken  of  approximately
$1,561,000.  During the year ended December 31, 2002, the Partnership's share of
profits in one Local  Limited  Partnership  of  approximately  $1,000 was offset
against prior year losses not recognized.  As of December 31, 2003 and 2002, the
Partnership  has  not  recognized   approximately   $1,822,000  and  $3,279,000,
respectively,  of its  allocated  cumulative  share of losses from two and three
Local Limited Partnerships in which its investment has been reduced to zero.

During 1993 the Partnership re-evaluated the timing of the collectibility of the
advances and determined,  based on the Local Limited  Partnerships'  operations,
that such advances are not likely to be collected.  For accounting purposes, the
Partnership  treated the advance balance as additional  investments in the Local
Limited Partnerships. The balance was then reduced to zero, with a corresponding
charge to operations to reflect a portion of the previously  unrecognized losses
on  investments.  At  December  31,  2003,  there were no  advances to the Local
Limited Partnerships owed to the Partnership.

Summaries of the combined  balance  sheet of the  aforementioned  Local  Limited
Partnerships as of December 31, 2003 and the combined  results of operations for
the years ended December 31, 2003 and 2002, are as follows:

                        CONDENSED COMBINED BALANCE SHEET
                        OF THE LOCAL LIMITED PARTNERSHIPS
                                 (in thousands)
                                                               December 31, 2003
Assets:
  Land                                                                $ 896
  Buildings and improvements, net of accumulated
   depreciation of approximately $4,415                                3,653
  Other                                                                1,271

                                                                     $ 5,820
Liabilities:
  Mortgage notes payable                                             $ 1,707
  Notes payable                                                        2,057
  Accrued interest on notes payable                                    3,644
  Other liabilities                                                      395

Partners' Deficit:
  National Housing Partnership Realty Fund Two                        (1,822)
  Other partners                                                        (161)
                                                                      (1,983)

                                                                     $ 5,820

                     CONDENSED COMBINED STATEMENTS OF OPERATIONS
                        OF THE LOCAL LIMITED PARTNERSHIPS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                                           2003             2002
                                                                         (Restated)
<S>                                                      <C>              <C>
Revenues                                                 $ 1,753          $ 1,685

Expenses:
  Operating expenses                                         972              975
  Interest, taxes and insurance                              467              508
  Depreciation                                               420              387
                                                           1,859            1,870

Loss from continuing operations                             (106)            (185)
Loss from discontinued operations                            (40)            (214)
Gain on sale of discontinued operations                      262               --
Gain on forgiveness of debt of discontinued
  operations                                               2,720               --

Net income (loss)                                        $ 2,836           $ (399)
</TABLE>

The condensed  combined  statement of operations  for December 31, 2002 has been
restated to reflect the  operations of Caroline Arms Limited  Partnership  which
was  sold  during  2003  as  discontinued  operations.  The  combined  financial
statements of the Local Limited  Partnerships  are prepared on the accrual basis
of accounting.  All Local Limited  Partnerships  operate rental housing projects
organized  under  Section 236 of the  National  Housing  Act.  Each of the Local
Limited  Partnerships  receives some form of rental  assistance from HUD. During
the year ended  December  31, 2003 and 2002,  the  projects  received a total of
approximately $685,000 and $1,436,000,  respectively,  of rental assistance from
HUD.

Regulation of Affordable Housing

The  Federal  Housing   Administration  ("FHA")  has  contracted  with  the  two
subsidized  rental  projects  under  Section  8 of Title II of the  Housing  and
Community  Development  Act of 1974 to make housing  assistance  payments to the
Local  Limited  Partnerships  on behalf of qualified  tenants.  The terms of the
agreements are for one year with annual renewal options.

In 1997 and again in 1999,  Congress  enacted new ways to determine  rent levels
for properties  receiving HUD's rental  assistance under Section 8 of the United
States  Housing Act of 1937 ("Section 8") after the expiration of their original
Section 8 contracts.  This new legislation will affect 230 units, or 100% of the
units in which the Partnership has invested.  On October 27, 1997, the President
signed into law the Multifamily Assisted Housing Reform and Affordability Act of
1997 (the "1997 Housing Act").  Under the 1997 Housing Act,  certain  properties
assisted under expiring  Section 8 contracts and which have been receiving rents
deemed to be above  comparable  market  levels for  unassisted  properties,  and
financed  with  HUD-insured  mortgage  loans,  will  have,  upon the  renewal or
extension  of  Section  8  contracts,  rents  marked  to  market.  This  will be
accomplished  in  various  ways,  the goal  being to  reduce  Section 8 rents to
comparable  market  levels,  thereby  reducing  the  federal  Section  8 subsidy
obligation,  and (ideally) by simultaneously lowering, or eliminating,  required
debt  service  costs  (and  decreasing  operating  costs)  as  needed  to ensure
financial  viability at the reduced rent levels. The program also incorporates a
requirement  to  perform  any  repair  or  rehabilitation  deemed  necessary  by
depositing  funds to cover the first twelve month's work, and making  sufficient
monthly reserve  deposits to ensure work required in succeeding  years. In 1999,
Congress  enacted  legislation  (the "1999  Housing  Act") that  expanded on and
clarified  the  provisions  of  the  1997  Housing  Act,  including   permitting
properties whose Section 8 rents were below comparable  market rents to increase
their Section 8 rents to market.

The 1997 and 1999  Housing  Acts  (together,  the  "Housing  Acts")  permit  the
retention of project  based  Section 8 contracts  for most  properties in rental
markets  with a limited  supply of  affordable  housing or where the tenants are
particularly  vulnerable  populations  including the elderly,  disabled or large
families.  In rental markets without a limited supply of affordable housing, the
Housing Acts provide for phasing out project  based  subsidies,  converting  the
assistance to tenant based assistance or vouchers.  Under a tenant based system,
rental  vouchers  would be issued to  qualified  tenants who then could elect to
reside at  properties  of their  choice,  including  the  property in which they
currently  reside.   Voucher  rent  levels  are  established  by  local  housing
authorities  under  guidelines set by HUD. While the Partnership does not expect
the provisions of the Housing Acts to result in a significant  number of tenants
relocating from the properties  owned by the Local Limited  Partnerships,  there
can be no  assurance  that  the  new  legislation  will  not  significantly  and
adversely  affect  the  operations  of  the  properties  of  the  Local  Limited
Partnerships.

The following  table  indicates the year within which the Section 8 rent subsidy
contracts expire:

                                      Subsidized Units       Subsidized Units
                                        Expiring as a          Expiring as a
                       Number of     Percentage of Total       Percentage of
                         Units        Subsidized Units          Total Units

2004                      230               100%                   100%

All of the units which  receive rent  subsidies  from  Section 8 have  contracts
which expire during the year ending  December 31, 2004. The Housing Acts provide
for  several  options  under which a Local  Limited  Partnership  may elect,  as
appropriate,  to renew its  Section 8  contracts:  (1)  marking  rents up to the
comparable market rent, if current rents are below market; (2) renewing rents at
the current level,  if the level does not exceed  comparable  market rents,  and
receiving an operating cost adjustment factor (an "OCAF") or a budget based rent
increase,  as long as the  rents do not  exceed  comparable  market  rents;  (3)
marking rents down to comparable  market rents;  (4) marking their rents down to
an  "exception  rent" level,  when  comparable  market rents would be too low to
permit  continued  operation of the property  under the Section 8 program,  even
with full debt  restructuring;  or (5) opting out of the section 8 program.  For
properties   assisted  by  Section  8,  but  not  subject  to  these  provisions
(including,  but not limited to,  properties  which do not have  underlying  HUD
insured  mortgages,  or which have been financed  through  certain state housing
finance agency or bond-financed  mortgage programs),  rents will be continued at
current  levels,  plus  an OCAF or (in  some  instances)  a  budget  based  rent
increase.  In addition,  properties can opt out of the Section 8 program only if
very strict notice requirements have been met, including a requirement that HUD,
the tenants,  and the local  governing  body, be given twelve months notice of a
Local  Limited  Partnership's  intention  to opt  out of the  program  prior  to
contract termination.

Each of the options  requires an application to HUD, and, to a greater or lesser
extent,  the  fulfillment  of certain  procedural  submission  requirements  and
financial   requirements,   which  must  be  weighed  in  connection   with  the
determination of which option to select.

The Section 8  requirements  are separate  from the  requirements  governing the
underlying  HUD-insured  mortgage  loans,  and any  other  HUD,  state  or local
requirements, all of which must be fulfilled,  irrespective of the option chosen
with regard to the continuation of Section 8 participation.

Depreciation  is calculated  generally using the  straight-line  method over the
estimated useful lives of the related assets.

The mortgage  notes  payable are insured by the Federal  Housing  Administration
(FHA) and collateralized by first deeds of trust on the rental  properties.  The
notes bear  interest  at rates  ranging  from 8.5% and 9% per  annum.  FHA makes
subsidy payments  directly to the mortgage lender reducing the monthly principal
and interest  payments of the project owner to an effective  interest rate of 1%
over the  forty-year  term of the  notes.  The  liability  of the Local  Limited
Partnerships  under the mortgage notes is limited to the underlying value of the
real estate collateral plus other amounts deposited with lenders.

(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL PARTNER

The Partnership accrued administrative and reporting fees payable to the General
Partner of approximately $13,000 and $20,000 during 2003 and 2002, respectively.
The balance owed to the General Partner for these fees is approximately $437,000
as of December 31, 2003.

If paid at all, the accrued  administrative  and  reporting  fees payable to the
General  Partner  will be  paid  as  cash  flow  permits  or  from  the  sale or
refinancing  of one or both of the  underlying  properties  of the two remaining
Local Limited Partnerships. The Partnership repaid approximately $933,000 to the
General  Partner during the year ended  December 31, 2003,  from the proceeds of
the sale of the property owned by Caroline Arms Limited Partnership. No payments
were made during 2002 for these fees.

The General Partner advanced the Partnership  approximately  $60,000 and $41,000
during the years ended  December  31, 2003 and 2002,  respectively.  In 2003 and
2002, the  Partnership  repaid  advances of  approximately  $73,000 and $38,000,
respectively,  to the General Partner.  Interest is charged on borrowings at the
JP Morgan Chase prime interest rate plus 2% and amounted to less than $1,000 and
approximately   $1,000  for  the  years  ended   December  31,  2003  and  2002,
respectively. The bank's prime rate was 4.00% at December 31, 2003.

An  affiliate  of the General  Partner is the project  management  agent for the
projects.  The  management  agent  and  other  affiliates  earned  approximately
$221,000 and $268,000 for  management  fees and other  services  provided to the
Local Limited Partnerships during 2003 and 2002, respectively.

(4) ABANDONMENT OF LIMITED PARTNERSHIP UNITS

During  the  years  ended  December  31,  2003 and 2002 the  number  of  limited
partnership  units  decreased  by 320 units and 95 units,  respectively,  due to
limited  partners  abandoning  their  units.  In  abandoning  his or her Limited
Partnership  Unit(s),  a limited  partner  relinquishes  all right,  title,  and
interest in the partnership as of the date of abandonment.  However, the limited
partner is allocated  his or her share of net income or loss for that year.  The
income or loss per other limited partnership unit in the accompanying statements
of  operations  for 2003 and 2002 is  calculated  based on the  number  of units
outstanding  at the  beginning  of the year or 18,043  units for 2003 and 18,138
units for 2002.

(5) INCOME TAXES

The  Partnership  is not taxed on its income.  The  partners  are taxed in their
individual  capacities based upon their  distributive share of the Partnership's
taxable income and are allowed the benefits to be derived from off-setting their
distributive  share of the tax losses against  taxable income from other sources
subject to passive  loss rule  limitations.  The taxable  income or loss differs
from  amounts  included in the  statements  of  operations  because of different
methods used in  determining  the losses of the Local  Limited  Partnerships  as
discussed  below. The tax loss is allocated to partner groups in accordance with
Section  704(b) of the Internal  Revenue Code and  therefore is not  necessarily
proportionate to the interest percentage owned.

A reconciliation follows (in thousands):

                                                  Years Ended December 31,
                                                     2003            2002

Net income (loss) per financial statements         $ 1,219          $ (80)

Add (deduct):
  Partnership's share of Local Limited
   Partnerships' income                              4,053             798
  Other                                               (331)             23

Income per tax return                              $ 4,941          $ 741


The following is a reconciliation between the Partnership's reported amounts and
the  Federal  tax basis of net  (liabilities)  assets at  December  31, 2003 (in
thousands):

               Net liabilities as reported                $ (202)

               Add (deduct):
                 Investment in Partnerships                  147
                 Other                                       205

               Net assets - Federal tax basis             $  150

(6)   ALLOCATION  OF RESULTS OF  OPERATIONS,  CASH  DISTRIBUTIONS  AND GAINS AND
      LOSSES FROM SALE OR REFINANCING

Cash received from the sale or  refinancing  of any  underlying  property of the
Local Limited  Partnerships,  after payment of the applicable  mortgage debt and
the payment of all expenses related to the transaction,  is to be distributed in
the following manner:

      First,  to the General  Partner for any unrepaid loans to the  Partnership
      and any unpaid fees (other than disposition and refinancing fees);

      Second,  to the  establishment  of any reserves which the General  Partner
      deems  reasonably  necessary  for  contingent,   unmatured  or  unforeseen
      liabilities or obligations of the Partnership.

      Third, to the Limited Partners, until the Limited Partners have received a
      return of their  capital  contributions,  after  deduction  for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distribution from operations;

      Fourth, to the Limited  Partners,  until each Limited Partner has received
      an amount equal to a  cumulative  noncompounded  12% annual  return on its
      capital contribution, after deduction of (a) an amount equal to 50% of the
      tax  losses   allocated  to  the  Limited   Partner  and  (b)  prior  cash
      distributions  from operations and prior cash  distributions from sales or
      refinancing;

      Fifth,  to the General  Partner  until the General  Partner has received a
      return of its  capital  contributions,  after  deduction  for  prior  cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distributions from operations;

      Sixth,  to the  General  Partner for  disposition  and  refinancing  fees,
      including prior  disposition and refinancing  fees which have been accrued
      but are unpaid;

      Seventh,  to the partners  with  negative  capital  accounts to bring such
      accounts to zero; and

      Finally,  85% of the remaining sales proceeds to the Limited  Partners and
      15% to the General Partner.

Net income or loss from  operations of the  Partnership  is allocated 98% to the
Limited  Partners,  1% to the  General  Partner and 1% to the  Original  Limited
Partner.   Cash  distributions   from  operations,   after  payment  of  certain
obligations  (including  reimbursement  on a cumulative basis of direct expenses
incurred by the General  Partner or its  affiliates in managing the  properties)
and  payment  of  annual  cumulative   administrative  and  reporting  fees,  is
distributed 98% to the Limited Partners, 1% to the General Partner and 1% to the
Original Limited Partner.

Gain for Federal income tax purposes realized in the event of dissolution of the
Partnership  or  upon  sale  of  interests  in a Local  Limited  Partnership  or
underlying property will be allocated in the following manner:

      First, to the Limited Partners in an amount up to the negative balances of
      the capital  accounts of Limited  Partners in the same  proportion as each
      Limited  Partner's  negative  capital  account  bears  to  such  aggregate
      negative capital accounts;

      Second,  to the General  Partner in an amount up to the General  Partner's
      negative capital account, if any;

      Third,  to the Limited  Partners,  up to the  aggregate  amount of capital
      contributions  of the Limited  Partners,  after  deduction  for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash  distributions  from  operations,  in the same  proportion  that such
      Limited  Partner's  capital  contribution  bears to the  aggregate  of all
      Limited Partners' capital contributions;

      Fourth,  to the  Limited  Partners,  until each  Limited  Partner has been
      allocated  such an amount equal to a cumulative  noncompounded  12% annual
      return on their  capital  contribution,  after  deduction of (a) an amount
      equal to 50% of the tax losses  allocated  to the Limited  Partner and (b)
      prior cash distributions from operations and prior cash distributions from
      sales or refinancing;

      Fifth,  to the  General  Partner,  up to the  aggregate  amount of capital
      contributions made by the General Partner,  after deduction for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distributions from operations; and

      Finally,  85% of the remaining gain to the Limited Partners and 15% to the
      General Partner.

Losses for Federal  income tax purposes  realized in the event of dissolution of
the  Partnership  or upon sale of interest  in a Local  Limited  Partnership  or
underlying property will be allocated 85% to the Limited Partners and 15% to the
General Partner.

(7) LEGAL PROCEEDINGS

The  Partnership  is unaware of any pending or  outstanding  litigation  matters
involving  it or the  underlying  investment  properties  of the  Local  Limited
Partnerships in which the  Partnership  invests that are not of a routine nature
arising in the ordinary course of business.

(8) GOING CONCERN

All of the Local Limited  Partnership's notes payable are past due (see Note 2).
Therefore, there is the possibility that the Partnership will lose its ownership
interest  in  the  Local  Limited   Partnerships   through  foreclosure  by  the
noteholder.  Continuation of the Local Limited  Partnerships'  operations in the
present form is dependent on their  ability to extend the maturity date of these
notes or to repay or  refinance  the  notes.  The  financial  statements  do not
include any adjustments which might result from the outcome of this uncertainty.

(9)   REAL ESTATE AND ACCUMULATED  DEPRECIATION OF LOCAL LIMITED PARTNERSHIPS IN
      WHICH NHP REALTY FUND TWO HAS INVESTED

<TABLE>
<CAPTION>
                                                                            Cost
                                                                       Capitalized
                                       Initial Cost                     (Removed)
                                     To Local Limited                   Subsequent
                                        Partnership                   to Acquisition
                                      (in thousands)                  (in thousands)

                                                    Buildings
                                                   and Related
                                                     Personal                Carrying Cost
        Description         Encumbrances   Land      Property   Improvements  Adjustments

Harold House Limited
<S>                             <C>        <C>       <C>          <C>           <C>
  Partnership                   (1)        $ 80      $ 1,782      $ 2,040       $ (535)
San Juan Del Centro
  Limited Partnership           (1)          725       3,360        1,512            --

  Totals                                  $ 805      $ 5,142      $ 3,552       $ (535)
</TABLE>

<TABLE>
<CAPTION>

                       Gross Amount At Which Carried
                           At December 31, 2003
                              (in thousands)

                               Buildings
                                  And
                                Related
                               Personal            Accumulated    Date of      Date   Depreciable
     Description        Land   Property  Total(2) Depreciation  Construction Acquired Life-Years
                                           (3)         (3)
                                                 (in thousands)
Harold House Limited
<S>                    <C>      <C>      <C>         <C>           <C>        <C>        <C>
  Partnership          $ 159    $ 3,208  $ 3,367     $(1,794)      1973       05/85      5-50
San Juan Del Centro
  Limited Partnership     737     4,860    5,597      (2,621)      1970       04/85      5-50

  Totals               $ 896    $ 8,068  $ 8,964     $(4,415)
</TABLE>

(1) Schedule of Encumbrances (in thousands)
<TABLE>
<CAPTION>

                                                               Notes
                                                            Payable and
                                               Mortgage       Accrued
Partnership Name                                Notes         Interest       Total

<S>                                             <C>           <C>           <C>
Harold House Limited Partnership                $ 541         $ 1,746       $ 2,287
San Juan del Centro Limited Partnership          1,166          3,955         5,121

  Total                                        $ 1,707        $ 5,701       $ 7,408
</TABLE>

(2)   The  aggregate  cost of real  estate for  Federal  income tax  purposes at
      December   31,  2003  is   approximately   $9,494,000,   and   accumulated
      depreciation  for Federal  income tax  purposes  at  December  31, 2003 is
      approximately $7,310,000.

(3)   Reconciliation of real estate (in thousands)

                                                 Years Ended December 31,
                                                   2003           2002

Balance at beginning of period                    $16,188       $15,643
Improvements during the period                        387           545
Disposals of rental properties                     (7,611)           --
Balance at end of period                          $ 8,964       $16,188

      Reconciliation of accumulated depreciation (in thousands)

                                                   2003           2002

Balance at beginning of period                    $ 7,543       $ 6,767
Depreciation expense for the period                   420           776
Disposals of rental properties                     (3,548)           --
Balance at end of period                          $ 4,415       $ 7,543

Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

None.

Item 8a.    Controls and Procedures

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the General Partner,  who are the equivalent of the  Partnership's  principal
executive officer and principal financial officer,  respectively,  has evaluated
the  effectiveness of the Partnership's  disclosure  controls and procedures (as
such term is defined  in Rules  13a-15(e)  and  15d-15(e)  under the  Securities
Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and  principal  financial  officer of the General  Partner,  who are the
equivalent  of the  Partnership's  principal  executive  officer  and  principal
financial  officer,  respectively,  have  concluded  that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fourth quarter of 2003 that have materially  affected,  or are reasonably likely
to  materially  affect,  the  Partnership's   internal  control  over  financial
reporting.



<PAGE>




                                    PART III

Item 9.     Directors and Executive Officers of the Registrant

The Partnership has no directors, officers or significant employees of its own.

The names, ages, business experience and involvement in legal proceedings of the
directors and officers of National  Corporation for Housing Partnerships (NCHP),
the sole general partner of The National Housing  Partnership,  the sole general
partner of the Partnership, and certain of its affiliates, are as follows:

Directors of NCHP

Three individuals comprise the Board of Directors of NCHP.

Jeffrey Adler                    42   Director and Executive Vice President
Ronald D. Monson                 47   Director and Executive Vice President
David R. Robertson               38   Director, President and Chief Executive
                                       Officer

Jeffrey Adler has been a Director and an Executive Vice President of the General
Partner since February 2004. Mr. Adler was appointed  Executive Vice  President,
Conventional Property Operations of AIMCO in February 2004. Previously he served
as Senior Vice President of Risk  Management and Marketing of AIMCO from 2002 to
2004.  Prior to joining AIMCO from 2000 to 2002,  Mr. Adler was Vice  President,
Property/Casualty  for Channelpoint,  a software company.  From 1990 to 2000 Mr.
Adler held several positions at Progressive Insurance.

Ronald D. Monson has been a Director  and an  Executive  Vice  President  of the
General  Partner since February  2001.  Mr. Monson was appointed  Executive Vice
President of AIMCO in February  2001.  Beginning in February  2004,  Mr.  Monson
assumed oversight of four of AIMCO's regional operating  centers.  From February
2001 to February  2004,  Mr. Monson  served as the head of AIMCO's  conventional
property operations.  Previously,  he served as Regional Vice President of AIMCO
from March 1997 to May 1998,  when he was appointed to Senior Vice  President of
the Midwest  Division  until  January 1999,  when he was  appointed  Senior Vice
President of the Far West Division, which role he filled until February 2001.

David R. Robertson has been a Director and President and Chief Executive Officer
of the General Partner since February 2004. Mr.  Robertson has been an Executive
Vice President of AIMCO since  February  2002,  and was appointed  President and
Chief  Executive  Officer of AIMCO  Capital in October  2002.  Mr.  Robertson is
responsible for property operations, asset management and transaction activities
within AIMCO Capital's portfolio of affordable properties, and for redevelopment
and construction  activities for both the  conventional and affordable  property
portfolios.  Since  February  1996,  Mr.  Robertson  has been Chairman and Chief
Executive  Officer of Robeks  Corporation,  a privately  held chain of specialty
food stores.

Officers

The current officers of NCHP and a description of their principal occupations in
recent years are listed below.

Martha L. Long                   44   Senior Vice President
Harry G. Alcock                  41   Executive Vice President
Miles Cortez                     60   Executive Vice President, General Counsel
                                        and Secretary
Patti K. Fielding                40   Executive Vice President
Paul J. McAuliffe                47   Executive Vice President and Chief
                                        Financial Officer
Thomas M. Herzog                 41   Senior Vice President and Chief Accounting
                                        Officer

Jeffrey Adler                        See "Directors of NCHP".
Ronald D. Monson                     See "Directors of NCHP".
David R. Robertson                   See "Directors of NCHP".

Martha L. Long has been  Senior Vice  President  of the  General  Partner  since
February 2004. Ms. Long has been with AIMCO since October 1998 and has served in
various capacities.  From 1998 to 2001, Ms. Long served as Senior Vice President
and Controller of AIMCO and the General Partner.  During 2002 and 2003, Ms. Long
served as Senior Vice President of Continuous Improvement for AIMCO.

Harry G. Alcock was appointed Executive Vice President of the General Partner in
February 2004 and has been Executive Vice President and Chief Investment Officer
of AIMCO since October  1999.  Prior to October 1999 Mr. Alcock served as a Vice
President  of AIMCO  from July 1996 to October  1997,  when he was  promoted  to
Senior Vice  President-Acquisitions  where he served  until  October  1999.  Mr.
Alcock has had responsibility for acquisition and financing  activities of AIMCO
since July 1994.

Miles  Cortez was  appointed  Executive  Vice  President,  General  Counsel  and
Secretary of the General  Partner in February  2004 and of AIMCO in August 2001.
Prior to joining  AIMCO,  Mr. Cortez was the senior  partner of Cortez  Macaulay
Bernhardt  &  Schuetze  LLC,  a Denver  law firm,  from  December  1997  through
September 2001.

Patti K. Fielding was appointed  Executive  Vice President - Securities and Debt
of the General  Partner in  February  2004 and of AIMCO in  February  2003.  Ms.
Fielding  previously  served as Senior Vice  President - Securities  and Debt of
AIMCO from  January  2000 to February  2003.  Ms.  Fielding is  responsible  for
securities and debt financing and the treasury  department.  Ms. Fielding joined
AIMCO in February 1997 and served as Vice  President - Tenders,  Securities  and
Debt until January 2000.

Paul J. McAuliffe has been  Executive Vice President of the General  Partner and
AIMCO since  February  1999 and was  appointed  Chief  Financial  Officer of the
General  Partner and AIMCO in October 1999. From May 1996 until he joined AIMCO,
Mr. McAuliffe was Senior Managing Director of Secured Capital Corp.

Thomas M.  Herzog was  appointed  Senior  Vice  President  and Chief  Accounting
Officer of the General  Partner in February  2004 and of AIMCO in January  2004.
Prior to  joining  AIMCO in January  2004,  Mr.  Herzog  was at GE Real  Estate,
serving  as Chief  Accounting  Officer & Global  Controller  from  April 2002 to
January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior
to joining GE Real  Estate,  Mr.  Herzog was at  Deloitte & Touche LLP from 1990
until 2000, including a two-year assignment in the real estate national office.

There is no family  relationship  between  any of the  foregoing  directors  and
officers.

The board of  directors of the General  Partner  does not have a separate  audit
committee.  As such, the board of directors of the General Partner  fulfills the
functions of an audit  committee.  The board of directors  has  determined  that
David R.  Robertson  meets  the  requirement  of an "audit  committee  financial
expert".

The  directors  and  officers of the General  Partner  with  authority  over the
Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code
of ethics that applies to such  directors and officers that is posted on AIMCO's
website  (www.AIMCO.com).  AIMCO's  website is not  incorporated by reference to
this filing.

Item 10.    Executive Compensation

National Housing  Partnership  Realty Fund Two has no officers or directors.  No
direct form of compensation  or remuneration  was paid by the Partnership to any
officer or director of the General Partner.  However,  reimbursements  and other
payments have been made to the Partnership's General Partner and its affiliates,
as described in "Item 12. Certain Relationships and Related Transactions."

Item 11.    Security Ownership of Certain Beneficial Owners and Management

1133 Fifteenth  Street Two Associates,  a Maryland  Limited  Partnership,  whose
general partner is NHP and whose limited  partners were employees of NCHP at the
time the partnership was formed, owns a 1% interest in the Partnership.

NHP is also  the sole  general  partner  of NHP  Investment  Partners  I and NHP
Investment Partners III. NHP Investment Partners I, a limited partnership, holds
a 4.5%  limited  partnership  interest  (1% for  allocation  of  losses)  in the
remaining  two  Local  Limited  Partnerships.  Prior  to the  admittance  of the
Partnership into the Local Limited  Partnerships,  NHP Investment Partners I and
NHP  Investment  Partners  III held a 1% general  partnership  interest  and 98%
limited partnership interest in the Local Limited Partnerships.

The following table sets forth certain information regarding limited partnership
units of the Partnership owned by each person or entity known by the Partnership
to own beneficially or exercise voting or dispositive  control over more than 5%
of the Partnership's limited partnership units as of December 31, 2003.

         Name of Beneficial Owner              Number of Units        % of Class

AIMCO and affiliates                                1,949                11.00%
  (affiliates of the General Partner)

The business address of AIMCO is 4582 S. Ulster St. Parkway, Suite 1100, Denver,
Colorado 80237.

Item 12.    Certain Relationships and Related Transactions

The Partnership accrued administrative and reporting fees payable to the General
Partner of approximately $13,000 and $20,000 during 2003 and 2002, respectively.
The balance owed to the General Partner for these fees is approximately $437,000
as of December 31, 2003.

If paid at all, the accrued  administrative  and  reporting  fees payable to the
General  Partner  will be  paid  as  cash  flow  permits  or  from  the  sale or
refinancing  of one or both of the  underlying  properties  of the two remaining
Local Limited Partnerships. The Partnership repaid approximately $933,000 to the
General  Partner during the year ended  December 31, 2003,  from the proceeds of
the sale of the property owned by Caroline Arms Limited Partnership. No payments
were made during 2002 for these fees.

The General Partner advanced the Partnership  approximately  $60,000 and $41,000
during the years ended  December  31, 2003 and 2002,  respectively.  In 2003 and
2002, the  Partnership  repaid  advances of  approximately  $73,000 and $38,000,
respectively,  to the General Partner.  Interest is charged on borrowings at the
JP Morgan Chase prime interest rate plus 2% and amounted to less than $1,000 and
approximately   $1,000  for  the  years  ended   December  31,  2003  and  2002,
respectively. The bank's prime rate was 4.00% at December 31, 2003.

An  affiliate  of the General  Partner is the project  management  agent for the
projects.  The  management  agent  and  other  affiliates  earned  approximately
$221,000 and $268,000 for  management  fees and other  services  provided to the
Local Limited Partnerships during 2003 and 2002, respectively.

Item 13.    Exhibits and Reports on Form 8-K

      (a)   Exhibits

            Exhibit 31.1, Certification of equivalent of Chief Executive Officer
            pursuant to Securities  Exchange Act Rules  13a-14(a)/15d-14(a),  as
            Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

            Exhibit 31.2, Certification of equivalent of Chief Financial Officer
            pursuant to Securities  Exchange Act Rules  13a-14(a)/15d-14(a),  as
            Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

            Exhibit 32.1,  Certification  Pursuant to 18 U.S.C. Section 1350, as
            Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      (b)   Reports on Form 8-K filed during the fourth quarter of 2003:

            None.

Item 14.    Principal Accounting Fees and Services

The General Partner has reappointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Partnership for 2004.

Audit  Fees.  The  Partnership   paid  to  Ernst  &  Young  LLP  audit  fees  of
approximately $42,000 and $41,000 for 2003 and 2002, respectively.

Tax Fees.  The  Partnership  paid to Ernst & Young LLP fees for tax services for
2003 and 2002 of approximately $3,000 and $8,000, respectively.

<PAGE>
                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                                    (Registrant)


                                    By:   The National Housing Partnership,
                                          Its sole General Partner


                                    By:   National Corporation for Housing
                                          Partnerships, its sole General Partner


                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          Director, President and Chief
                                          Executive Officer

                                    By:   /s/Thomas M. Herzog
                                          Thomas M. Herzog
                                          Senior Vice President and
                                          Chief Accounting Officer


                                    Date: March 29, 2004


In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


/s/Ronald D. Monson           Director and Executive        Date: March 29, 2004
Ronald D. Monson              Vice President


/s/David R. Robertson         Director, President and       Date: March 29, 2004
David R. Robertson            Chief Executive Officer


/s/Thomas M. Herzog           Senior Vice President and     Date: March 29, 2004
Thomas M. Herzog              Chief Accounting Officer




<PAGE>




Exhibit 31.1


                                  CERTIFICATION


I, David R. Robertson, certify that:


1.    I have  reviewed  this annual  report on Form  10-KSB of National  Housing
      Partnership Realty Fund Two;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer(s) and I are responsible for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      (c)   Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

Date:  March 29, 2004

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President  and Chief  Executive  Officer  of
                                    National     Corporation     for     Housing
                                    Partnerships,   equivalent   of  the   chief
                                    executive officer of the Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Thomas M. Herzog, certify that:


1.    I have  reviewed  this annual  report on Form  10-KSB of National  Housing
      Partnership Realty Fund Two;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer(s) and I are responsible for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      (c)   Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

Date:  March 29, 2004

                                    /s/Thomas M. Herzog
                                    Thomas M. Herzog
                                    Senior Vice  President and Chief  Accounting
                                    Officer of National  Corporation for Housing
                                    Partnerships,   equivalent   of  the   chief
                                    financial officer of the Partnership


<PAGE>


Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002



In  connection  with the  Annual  Report  on Form  10-KSB  of  National  Housing
Partnership Realty Fund Two (the "Partnership"), for the year ended December 31,
2003 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the  "Report"),  David R.  Robertson,  as the equivalent of the Chief Executive
Officer of the Partnership, and Thomas M. Herzog, as the equivalent of the Chief
Financial  Officer of the  Partnership,  each hereby  certifies,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  March 29, 2004


                                           /s/Thomas M. Herzog
                                    Name:  Thomas M. Herzog
                                    Date:  March 29, 2004


This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.