FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report



                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                 For the quarterly period ended September 30, 2000


[ ] TRANSITION REPORT PURSUANT TO 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)

                                 (864) 239-1000
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  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___

<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

a)
                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                         Statement of Financial Position
                                   (Unaudited)

                               September 30, 2000
                                   (in thousands)


ASSETS
   Investments in and advances to Local Limited
      Partnerships (Note 2)                                           $ 2,204


LIABILITIES AND PARTNERS' DEFICIT

Liabilities
   Accrued expenses                                                    $   45
   Administrative and reporting fees payable to General
      Partner                                                           1,271
   Notes payable to General Partner                                     1,160
   Accrued interest on notes payable to General Partner                 1,777
                                                                        4,253

Partners' deficit
   General Partner -- The National Housing Partnership (NHP)             (176)
   Original Limited Partner -- 1133 Fifteenth Street Two
      Associates                                                         (180)
   Other Limited Partners -- 18,258 investment units                   (1,693)
                                                                       (2,049)
                                                                      $ 2,204


                   See Accompanying Notes to Financial Statements


<PAGE>


b)

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

<TABLE>
<CAPTION>

                                                 Three Months Ended       Nine Months Ended
                                                   September 30,            September 30,
                                                 2000         1999        2000        1999
Revenues:
  Share of profits from Local Limited
<S>                                               <C>          <C>         <C>         <C>
     Partnership                                  $   4        $ 60        $  34       $ 185
  Distributions in excess of investment
     in Local Limited Partnership                    21          --           55          --
  Interest income from Local Limited
     Partnership                                     --          --           --         124
                                                     25          60           89         309
Costs and Expenses:
  Administrative and reporting fees to
     General Partner                                 16          34           52         103
  Interest on notes payable to General
     Partner                                         39          61          157         182
  Interest on partner loans                          --          --           --           1
  Other operating expenses                           31          20           72          52
                                                     86         115          281         338

Loss before extraordinary gain                      (61)        (55)        (192)        (29)
Extraordinary gain on loss of investment in
  Local Limited Partnership                         813          --          813          --

Net income (loss)                                $  752       $ (55)       $ 621       $ (29)

Allocation of net income (loss):
  General Partner - NHP                           $   7        $ (1)        $  6        $ --
  Original Limited Partner - 1133
     Fifteenth Street Two Associates                  8          (1)           6          --
  Other limited partners' investment units          737         (53)         609         (29)

                                                 $  752       $ (55)       $ 621       $ (29)
Net income (loss) per limited partnership
  interest                                      $ 40.37     $ (2.90)    $ 33.36      $ (1.58)
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>

c)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                         Statement of Partners' Deficit
                                   (Unaudited)
                                   (in thousands)

<TABLE>
<CAPTION>


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

<S>                 <C> <C>           <C>           <C>          <C>            <C>
Deficit at December 31, 1999          $(182)        $ (186)      $(2,302)       $(2,670)

Net income - nine months ended
   September 30, 2000                     6              6           609            621

Deficit at September 30, 2000         $(176)        $ (180)      $(1,693)       $(2,049)

Percentage interest at
   September 30, 2000                    1%              1%           98%          100%
                                         (A)            (B)           (C)
</TABLE>

(A)   General Partner
(B)   Original Limited Partner
(C)   Consists of 18,258 investment units

                   See Accompanying Notes to Financial Statements


<PAGE>

d)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                        (A Maryland Limited Partnership)
                            Statements of Cash Flows
                                   (Unaudited)
                                   (in thousands)
<TABLE>
<CAPTION>

                                                                   Nine Months Ended
                                                                     September 30,
                                                                  2000            1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                              <C>              <C>
  Operating expenses paid                                        $  (62)          $ (75)
  Interest income received from Local Limited
   Partnership                                                       --             124
  Distributions received in excess of investment in
   Local Limited Partnership                                         55              --
  Payment of administrative reporting fees to General
   Partner                                                           --             (97)
  Payment of interest on partner loans                               --              (3)

        Net cash used in operating activities                        (7)            (51)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of advances from General Partner                         --             (34)

Cash flows from investing activities:
  Distributions from Local Limited Partnership                        5              62

NET DECREASE IN CASH AND CASH EQUIVALENTS                            (2)            (23)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      2              26

CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $ --            $  3

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH USED IN
  OPERATING ACTIVITIES:
   Net income (loss)                                              $ 621           $ (29)
   Adjustments to reconcile net income (loss) to net
   cash used in operating activities:
     Share of profits from Local Limited Partnerships               (34)           (185)
     Extraordinary gain on loss of investment in Local
      Limited Partnership                                          (813)             --
     Increase in accrued interest on deferred
      acquisition notes                                             157             182
     Decrease in accrued interest on Partner loans                   --              (2)
     (Decrease) increase in administrative and
      reporting fees payable                                         52               6
     Increase (decrease) in other accrued expenses                   10             (23)

        Total adjustments                                          (628)            (22)

Net cash used in operating activities                             $  (7)          $ (51)
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>

e)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                        (A Maryland Limited Partnership)

                          Notes to Financial Statements
                                   (Unaudited)


(1)   ACCOUNTING POLICIES

Organization

National  Housing   Partnership  Realty  Fund  Two  (the  "Partnership"  or  the
"Registrant")  is a limited  partnership  organized  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
interests  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").  On April 30, 1985, the Partnership  began raising capital
and acquiring interests in Local Limited Partnerships.

The National Housing  Partnership,  a District of Columbia  limited  partnership
("NHP" or 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  unit.  During  1985,  the sale of
interests  was closed after the sale of 18,300  interests  to limited  partners.
Apartment  Investment  and  Management  Company  ("AIMCO")  and  its  affiliates
ultimately  control the General  Partner.  The original  Limited  Partner of the
Partnership is 1133 Fifteenth Street Two Associates, whose limited partners were
key  employees  of the general  partner of NHP at the time the  Partnership  was
formed. NHP is the general partner of 1133 Fifteenth Street Two Associates.

Basis of Presentation

The accompanying  unaudited interim financial statements reflect all adjustments
which are, in the opinion of  management,  necessary for a fair statement of the
financial condition and results of operations for the interim periods presented.
All such adjustments are of a normal and recurring nature.

While the General Partner  believes that the disclosures  presented are adequate
to make the  information  not  misleading,  it is suggested that these financial
statements  be read in  conjunction  with the  financial  statements  and  notes
included in the  Partnership's  Annual  Report filed on Form 10-KSB for the year
ended December 31, 1999.

Certain reclassifications have been made to the 1999 information to conform with
the 2000 presentation.

(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:
Meadows Apartments Limited Partnership,  Esbro Limited Partnership,  Rodeo Drive
Limited   Partnership,   Menlo  Limited   Partnership,   Mayfair  Manor  Limited
Partnership,  Hurbell I Limited  Partnership,  Hurbell II  Limited  Partnership,
Hurbell III Limited  Partnership,  Tinker Creek  Limited  Partnership,  Rockwell
Limited  Partnership,  Meadows East Apartments  Limited  Partnership,  Kimberton
Apartments Limited Partnership, San Juan del Centro Limited Partnership, Gulfway
Limited  Partnership,   Caroline  Arms  Limited  Partnership,   Hilltop  Limited
Partnership,  Harold  House  Limited  Partnership,  Park  Avenue  West I Limited
Partnership,  West Oak Village Limited Partnership,  Park Avenue West II Limited
Partnership, and Windsor Apartments Associates Limited Partnership. During 1998,
the  Partnership's  interest  in  Gulfway  Limited  Partnership,  Menlo  Limited
Partnership  and Rockwell  Limited  Partnership  were foreclosed upon and Tinker
Creek Limited  Partnership  sold its property.  During 1999,  the  Partnership's
interest in Meadows East Apartments  Limited  Partnership and Meadows Apartments
Limited  Partnership were foreclosed upon. During the first quarter of 2000, the
Partnership's  interest in Esbro  Limited  Partnership,  Mayfair  Manor  Limited
Partnership, Park Avenue West I Limited Partnership, Park Avenue West II Limited
Partnership, and Rodeo Drive Limited Partnership was foreclosed upon. During the
third  quarter of 2000,  the  Partnership's  interest  in  Kimberton  Apartments
Limited Partnership and Hilltop Limited Partnership was foreclosed upon.

Meadows  Apartments and Meadows East Apartments  Limited  Partnerships  both had
notes  payable  which  were  due  on  December  12,  1997.   The  Local  Limited
Partnerships did not have the resources to pay the amounts due. Effective August
5, 1999 and December 1, 1999,  Meadows  Apartments  and Meadows East  Apartments
Limited  Partnership  notes  were  foreclosed  upon.  Pursuant  to the  security
agreement  of the note  payable,  the note  holder was  substituted  as the sole
limited partner of the Local Limited Partnership in place of the Partnership and
the note holder's  assignee was substituted as the general  partner.  No gain or
loss has been recorded as a result of the transfer of this partnership interest.
With the loss of the  Partnership's  interest in Meadows  Apartments and Meadows
East Apartments to the note holders, the Partnership will not receive any future
benefits from these Local Limited Partnerships.

Esbro,  Mayfair  Manor,  Park Avenue West I, Park Avenue West II and Rodeo Drive
Limited  Partnership  all had notes  payable  which were due October  15,  1997,
October 15, 1997,  December  20,  1999,  December 20, 1999 and December 6, 1997,
respectively.  The Local Limited  Partnerships did not have the resources to pay
the amounts due. During January 2000, the holders of the notes payable  relating
to Esbro, Mayfair Manor, Park Avenue West I, Park Avenue West II and Rodeo Drive
Limited  Partnership  properties  exercised  their  remedies  under the security
agreement with respect to such notes payable,  and were  substituted as the sole
limited  partner of the  applicable  Local Limited  Partnership  in place of the
Partnership  and such note  holder's  assignee  was  substituted  as the general
partner.  No gain or loss has been  recorded as a result of the transfer of this
partnership  interest.  With the loss of the  Partnership's  interest  in Esbro,
Mayfair  Manor,  Park  Avenue West I, Park Avenue West II and Rodeo Drive to the
note holders,  the  Partnership  will not receive any future benefits from these
Local Limited  Partnerships  and taxable  income through the date of foreclosure
will be generated  and  allocated  to the  Partnership's  investors  without any
distributable cash. The specific impact of the tax consequence is dependent upon
each specific partner's individual tax situation.

Hilltop  Limited  Partnership  had a note  payable  which was due on November 2,
1999. The Local Limited Partnership did not have the resources to pay the amount
due. Effective August 9, 2000, Hilltop Limited Partnership's note was foreclosed
upon.  Pursuant to the security  agreement of the note payable,  the note holder
was substituted as the sole limited partner of the Local Limited  Partnership in
place of the Partnership  and the note holder's  assignee was substituted as the
general  partner.  No gain or loss has been recorded as a result of the transfer
of this partnership  interest.  With the loss of the  Partnership's  interest in
Hilltop Limited Partnership to the note holder, the Partnership will not receive
any future benefits from this Local Limited  Partnership.  In addition  Caroline
Arms, Harold House,  Hurbell I, Hurbell II, Hurbell III, and San Juan Del Cantro
Limited  Partnerships  all have notes payable which are currently in default and
accordingly,  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 the
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.

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'  profits.  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, 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. As a result, the Partnership did not recognize  approximately  $298,000
and $517,000 of losses from nine and twelve Local  Limited  Partnerships  during
the nine months ended September 30, 2000 and 1999, respectively. During the nine
months ended September 30, 2000, the Partnership's share of profits in two Local
Limited  Partnerships in the amount of approximately  $77,000 was offset against
prior years' losses not taken. As of September 30, 2000, the Partnership has not
recognized  approximately $7,119,000 of its allocated cumulative share of losses
from seven Local Limited  Partnerships  in which its investment has been reduced
to zero.  The  Partnership's  allocated  cumulative  share of losses in the five
Local Limited Partnerships,  of which the investment account had been reduced to
zero,  that were  foreclosed on during the nine months ended  September 30, 2000
was approximately $11,006,000.

No working capital  advances or repayments were made between the Partnership and
the Local Limited  Partnerships for the nine months ended September 30, 2000 and
1999. 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.

Advances  to the  Local  Limited  Partnership  remain  due  and  payable  to the
Partnership.  Interest is calculated at the Chase Manhattan Bank prime rate plus
2% (11.50%  at  September  30,  2000).  Payment of  principal  and  interest  is
contingent upon the Local Limited Partnerships having available surplus cash, as
defined by HUD  regulations,  from operations or from the sale or refinancing of
the Local Limited  Partnership  properties.  Any future repayment of advances or
interest will be reflected as Partnership income when received.

The  following  are combined  statements  of  operations  for the three and nine
months ended  September  30, 2000 and 1999,  respectively,  of the Local Limited
Partnerships in which the Partnership has invested.  The statements are compiled
from  financial  statements of the Local Limited  Partnerships,  prepared on the
accrual basis of accounting, as supplied by the managing agents of the projects,
and are unaudited.

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                         Three Months Ended         Nine Months Ended
                                           September 30,              September 30,
                                         2000         1999          2000         1999
                                           (in thousands)            (in thousands)

<S>                                    <C>           <C>          <C>          <C>
Rental income                          $ 1,674       $ 2,812      $ 5,601      $ 8,714
Other income                                57           143          212          368
      Total income                       1,731         2,955        5,813        9,082

Operating expenses                       1,011         1,761        3,567        5,493
Interest, taxes, and insurance             242           769        1,293        2,435
Depreciation                               346           422        1,137        1,382
      Total expense                      1,599         2,952        5,997        9,310

Net income (loss)                       $  132          $  3       $ (184)      $ (228)

National Housing Partnership
  Realty Fund Two share of income
  (loss)                                 $  69         $  --       $ (186)      $ (233)
</TABLE>

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the nine month periods ended September 30, 2000 and 1999, the Partnership
accrued  administrative and reporting fees payable to the General Partner in the
amount  of  approximately  $52,000  and  $103,000,  respectively,  for  services
provided to the Partnership. The Partnership paid $97,000 to the General Partner
for these fees during the nine months ended September 30, 1999. No payments have
been made during the nine months ended  September  30, 2000.  The amount of fees
due to the General Partner by the Partnership  was  approximately  $1,271,000 at
September 30, 2000.

No working capital advances or repayments were made during the nine months ended
September 30, 2000.  Subsequent to September 30, 2000, a working capital advance
of $25,000 was made by the General  Partner to the  Partnership to pay operating
expenses of the  Partnership.  During the nine months ended  September 30, 1999,
the Partnership  paid the General Partner  approximately  $34,000 and $3,000 for
repayment  of a working  capital  advance and accrued  interest on the  advance,
respectively.

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 more
of the underlying properties of the Local Limited Partnerships.

(4)   NOTES PAYABLE

On July 24, 2000, the holder  foreclosed on the note payable by the  Partnership
which was  collaterized  by its  interest  in  Kimberton  Apartments  Associates
Limited Partnership.  The holder of the note was NHP, the general partner of the
Partnership  and an  affiliated  party.  As a result  of this  transaction,  The
Partnership lost its interest in the Local Limited Partnership.  The Partnership
recognized  an  extraordinary  gain on the loss of its  investment in this Local
Limited  Partnership of  approximately  $813,000.  The gain was comprised of the
write off of the note  payable  principal  and  accrued  interest  offset by the
Partnership's  investment account balance in the Local Limited Partnership as of
the foreclosure date. With the loss of the  Partnership's  interest in Kimberton
Apartments  Associates  Limited  Partnership to the note holder, the Partnership
will not receive any future benefits from the Local Limited Partnership.

The remaining note payable by the Partnership bears simple interest at a rate of
10% per annum.  The note is payable to NHP in the same  amount and same terms as
the note executed by NHP to the former project  owner,  is  nonrecourse,  and is
collaterized  by the  Partnership's  interest in Windsor  Apartments  Associates
Limited  Partnership.  The note was due on October 24, 1999. The  Partnership is
currently in default on this note and has received  notification from the holder
of the note of their intent to initiate foreclosure proceedings.

(5)   SEGMENT INFORMATION

The Partnership has only one reportable  segment.  Due to the very nature of the
Partnership's  operations,  the  General  Partner  believes  that  segment-based
disclosures will not result in a more meaningful presentation than the financial
statements as currently presented.

(6)   LEGAL PROCEEDINGS

In 1997, NHP received subpoenas from the HUD Inspector General ("IG") requesting
documents relating to arrangements whereby NHP or any of its affiliates provided
compensation to owners of HUD-assisted or HUD-insured  multi-family  projects in
exchange for or in connection with property management of a HUD project. In July
1999, NHP received a grand jury subpoena  requesting  documents  relating to the
same  subject  matter as the HUD IG  subpoenas  and NHP's  operation  of a group
purchasing  program created by NHP, known as Buyers Access. To date, neither the
HUD IG nor the grand jury has  initiated  any action  against  NHP or  Apartment
Investment and Management Company ("AIMCO"),  the ultimate controlling entity of
NHP or, to NHP's or AIMCO's  knowledge,  any owner of a HUD property  managed by
NHP. AIMCO believes that NHP's operations and programs are in compliance, in all
material respects, with all laws, rules and regulations relating to HUD-assisted
or HUD-insured properties. NHP and AIMCO are cooperating with the investigations
and do not believe  that the  investigations  will result in a material  adverse
impact on their operations.  However, as with any similar  investigation,  there
can be no assurance that these will not result in material  fines,  penalties or
other costs.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

(7)   GOING CONCERN

The  Partnership's  note  payable and certain of the Local  Partnership's  notes
payable  are  past  due  (see  Notes  2  and  4).   Continuation  of  the  Local
Partnerships'  operations  in the present  form is  dependent  on its ability to
extend the maturity date of these notes,  or to repay or to refinance the notes.
These  conditions raise  substantial  doubt about their ability to continue as a
going concern.  The financial  statements do not include any  adjustments  which
might result from the outcome of this uncertainty.

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the  Registrant's  business and results of  operations,  including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operations.  Accordingly,  actual  results  could differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

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 September 30, 2000, the  Partnership  retained an interest in eight 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.

No working capital  advances or repayments were made between the Partnership and
the Local Limited  Partnerships during the nine months ended September 30, 2000.
Subsequent to September 30, 2000, a working  capital advance of $25,000 was made
by the  General  Partner to the  Partnership  to pay  operating  expenses of the
Partnership.  During the nine months ended  September 30, 1999, the  Partnership
paid the General  Partner  approximately  $34,000 and $3,000 for  repayment of a
working capital advance and accrued interest on the advance, respectively.

Distributions  received in excess of investment  in Local  Limited  Partnerships
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
seven of the remaining nine Local Limited  Partnerships had been reduced to zero
as of September 30, 2000. For these investments, cash distributions received are
recorded in income as  distributions  received in excess of  investment in Local
Limited Partnerships.  For those investments not reduced to zero,  distributions
received are recorded as  distributions  from Local Limited  Partnerships.  Cash
distributions of approximately $5,000 and $62,000 from Local Limited Partnership
were  received  during  the nine  months  ended  September  30,  2000 and  1999,
respectively.  The  receipt of  distributions  in future  quarters  and years 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.  One of these  investments,  Harold House  Limited
Partnership,  has a deferred  acquisition note that is in default. If the holder
of the  deferred  acquisition  note  exercises  its option of  foreclosure  (see
discussion below), this investment will be reduced to zero.

Net cash used in  operations  for the nine months ended  September  30, 2000 and
1999 was approximately $7,000 and $51,000, respectively.

The  Partnership  has no cash and cash  equivalents  at  September  30,  2000 as
compared to approximately  $2,000 at December 31, 1999. The decrease in cash and
cash equivalents is due to cash used in operating activities which was partially
offset by  distributions  from Local  Limited  Partnership.  The  ability of the
Partnership  to meet its on-going  cash  requirements  at September  30, 2000 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.  Cash  on  hand at
September 30, 2000 plus any distributions from the underlying  operations of the
combined  Local  Limited   Partnerships  is  expected  to  adequately  fund  the
operations  of the  Partnership  in the current year.  However,  there can be no
assurance  that future  distributions  will be  adequate to fund the  operations
beyond the current year.

The Partnership currently owes the General Partner approximately  $1,271,000 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.

Each  Local  Limited  Partnership,  with the  exception  of  Windsor  Apartments
Associates  Limited  Partnership  in which the  Partnership  currently  holds an
interest,  has a note payable due to the original owner of each  Property.  With
the exception of West Oak Village Limited Partnership,  these notes are all past
due and are  currently  in default.  West Oak  Village  Limited  Partnership  is
currently in default due to non-payment of required annual interest payments for
1999  (see  below).  The  note  related  to  Windsor  Apartments  Associates  of
approximately $1,160,000 is collateralized by the Partnership's interest in this
Local Limited  Partnership  and was due on October 24, 1999. The  Partnership is
currently in default on this note and has received  notification from the holder
of the note of their  intent to initiate  foreclosure  proceedings.  On July 24,
2000,  the holder of the note  collaterized  by the  Partnership's  interest  in
Kimberton Apartments  Associates Limited Partnership  forclosed on the note (see
below). These notes are secured by both the Partnership's and NHP's interests in
the  applicable  Local  Limited  Partnerships.  In the event of a default on the
notes,  the note  holders  would be able to assume  NHP's and the  Partnership's
interests in the Local Limited Partnerships.

The West Oak Village Limited  Partnership  note bears interest at the rate of 9%
per annum. The note is nonrecourse and is secured by a security  interest in the
Partnership's  interest  in the Local  Limited  Partnership.  During  1997,  the
noteholders  entered  into an  agreement  with the  Partnership  under which the
maturity date of the note was extended  until  November  2013,  assuming  annual
payments  of  interest  are  made to the  noteholders.  Under  the  terms of the
agreement,  payments  are to be made equal to the annual  interest at a variable
rate based on the prior  year's  interest  rate payment  multiplied  by the most
recent Consumer Price Index rate, with any increase subject to a floor of 2% and
a ceiling of 5%. At any time prior to the note's  maturity,  the Partnership has
the option to pay off the  acquisition  note at a  discount  equal to 70% of the
property's annual scheduled rent but not less than $700,000. The required annual
installment   of  interest  for  1999,   pursuant  to  the  agreement  with  the
noteholders,  was not  made.  Accordingly,  the  Local  Limited  Partnership  is
currently  in  default  on  the  required  annual  interest   payments  and  the
Partnership  interests are subject to potential  foreclosure.  The Local Limited
Partnership is actively attempting to sell its net assets.

Caroline Arms, Harold House, Hurbell I, Hurbell II, Hurbell III and San Juan Del
Centro Limited Partnerships all 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 were  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,  November 15, 1999,  December 19, 1999,
November 2, 1999,  December 19, 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.
Caroline Arms,  Harold House,  Hilltop and Hurbell I Local Limited  Partnerships
are all actively attempting to sell their respective net assets.

Esbro,  Mayfair  Manor,  Park Avenue West I, Park Avenue West II and Rodeo Drive
Limited  Partnership  all had notes  payable  which were due October  15,  1997,
October 15, 1997,  December  20,  1999,  December 20, 1999 and December 6, 1997,
respectively.  The Local Limited  Partnerships did not have the resources to pay
the amounts due. During January 2000, the holders of the notes payable  relating
to Esbro, Mayfair Manor, Park Avenue West I, Park Avenue West II and Rodeo Drive
Limited  Partnership  properties  exercised  their  remedies  under the security
agreement  with respect to such note payable,  and were  substituted as the sole
limited  partner of the  applicable  Local Limited  Partnership  in place of the
Partnership  and such note  holder's  assignee  was  substituted  as the general
partner.  No gain or loss has been  recorded as a result of the transfer of this
partnership  interest.  With the loss of the  Partnership's  interest  in Esbro,
Mayfair  Manor,  Park  Avenue West I, Park Avenue West II and Rodeo Drive to the
note holders,  the  Partnership  will not receive any future benefits from these
Local Limited  Partnerships  and taxable  income through the date of foreclosure
will be generated  and  allocated  to the  Partnership's  investors  without any
distributable cash. The specific impact of the tax consequence is dependent upon
each specific partner's individual tax situation.

On July 24, 2000, the holder  foreclosed on the note payable by the  Partnership
which was  collaterized  by its  interest  in  Kimberton  Apartments  Associates
Limited Partnership.  The holder of the note was NHP, the general partner of the
Partnership  and an  affiliated  party.  As a result  of this  transaction,  The
Partnership lost its interest in the Local Limited Partnership.  The Partnership
recognized  an  extraordinary  gain on the loss of its  investment in this Local
Limited  Partnership of  approximately  $813,000.  The gain was comprised of the
write off of the note  payable  principal  and  accrued  interest  offset by the
Partnership's  investment account balance in the Local Limited Partnership as of
the foreclosure date. With the loss of the  Partnership's  interest in Kimberton
Apartments  Associates  Limited  Partnership to the note holder, the Partnership
will not receive any future benefits from the Local Limited Partnership.

Hilltop  Limited  Partnership  had a note  payable  which was due on November 2,
1999. The Local Limited Partnership did not have the resources to pay the amount
due. Effective August 9, 2000, Hilltop Limited Partnership's note was foreclosed
upon.  Pursuant to the security  agreement of the note payable,  the note holder
was substituted as the sole limited partner of the Local Limited  Partnership in
place of the Partnership  and the note holder's  assignee was substituted as the
general  partner.  No gain or loss has been recorded as a result of the transfer
of this partnership  interest.  With the loss of the  Partnership's  interest in
Hilltop Limited Partnership to the note holder, the Partnership will not receive
any future benefits from this Local Limited Partnership.

Meadows  Apartments and Meadows East Apartments  Limited  Partnerships  both had
notes  payable  which  were  due  on  December  12,  1997.   The  Local  Limited
Partnerships did not have the resources to pay the amounts due. Effective August
5, 1999 and December 1, 1999,  Meadows  Apartments  and Meadows East  Apartments
Limited  Partnership  properties were foreclosed upon.  Pursuant to the security
agreement  of the note  payable,  the note  holder was  substituted  as the sole
limited partner of the Local Limited Partnership in place of the Partnership and
the note holder's  assignee was substituted as the general  partner.  No gain or
loss has been recorded as a result of the transfer of this partnership interest.
With the loss of the  Partnership's  interest in Meadows  Apartments and Meadows
East Apartments to the note holders, the Partnership will not receive any future
benefits from these Local Limited Partnerships.

As a result of the above,  there is  substantial  doubt about the  Partnership's
ability to continue as a going concern.  The financial statements do not include
any  adjustments  to reflect  the  possible  effects on the  recoverability  and
classification of assets or amounts and  classifications of liabilities that may
result from these uncertainties.

Results of Operations

The  Partnership  invested as a limited  partner in Local  Limited  Partnerships
which operated twenty-one rental housing properties.  At September 30, 2000, the
Partnership continued to hold an interest in nine 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.  As of September 30, 2000, the  Partnership
had no carrying basis in seven of the Local Limited  Partnerships  and therefore
reflected  no results  of  operations  for its share of losses  for these  Local
Limited Partnerships.

The  Partnership  had net income of  approximately  $621,000 for the nine months
ended September 30, 2000,  compared to a net loss of  approximately  $29,000 for
the nine months ended  September  30, 1999.  The  Partnership  had net income of
approximately  $752,000 for the three months ended September 30, 2000,  compared
to a net loss of approximately  $55,000 for the three months ended September 30,
1999.  The net income per unit of limited  partnership  is $33.36 for the 18,285
units  outstanding  at  September  30,  2000  compared to a net loss per unit of
limited  partnership of $1.58 for the 18,300 units  outstanding at September 30,
1999. The increase in net income was primarily  attributable to an extraordinary
gain on the loss of an investment in a Local Limited Partnership (see discussion
above).  The  increase  in loss  before this  extraordinary  gain was  primarily
attributable   to  decreases  in  the  share  of  profits  from  Local   Limited
Partnerships  and  interest  income from Local  Limited  Partnerships  partially
offset by an increase in  distributions in excess of investment in Local Limited
Partnerships  and  decreases  in costs and  expenses.  The  Partnership  did not
recognize  approximately  $298,000  of its  allocated  share of losses from nine
Local Limited  Partnerships for the nine months ended September 30, 2000, as the
Partnership's  net carrying basis in these Local Limited  Partnerships  had been
reduced to zero. In addition the  Partnership  did not  recognize  approximately
$77,000  of its  allocated  share  of  profits  from  two of the  Local  Limited
Partnerships for the nine months ended September 30, 2000 as the Partnership had
cumulative   unrecognized   losses  with  respect  to  that  one  Local  Limited
Partnerships.   The  Partnership's  share  of  losses  from  the  Local  Limited
Partnerships,  if not  limited to its  investment  account  balance,  would have
decreased  approximately $219,000 between periods. The decrease is primarily the
result of the loss of the Partnership's  interests in the Meadows Apartments and
Meadows East Apartments Limited  Partnerships in 1999 and Esbro,  Mayfair,  Park
Avenue West I, Park Avenue  West II,  Rodeo  Drive,  Kimberton  Apartments,  and
Hilltop Limited Partnerships during the nine months ended September 30, 2000 due
to foreclosures.

<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

In 1997, NHP received subpoenas from the HUD Inspector General ("IG") requesting
documents relating to arrangements whereby NHP or any of its affiliates provided
compensation to owners of HUD-assisted or HUD-insured  multi-family  projects in
exchange for or in connection with property management of a HUD project. In July
1999, NHP received a grand jury subpoena  requesting  documents  relating to the
same  subject  matter as the HUD IG  subpoenas  and NHP's  operation  of a group
purchasing  program created by NHP, known as Buyers Access. To date, neither the
HUD IG nor the grand jury has  initiated  any action  against  NHP or  Apartment
Investment and Management Company ("AIMCO"),  the ultimate controlling entity of
NHP or, to NHP's or AIMCO's  knowledge,  any owner of a HUD property  managed by
NHP. AIMCO believes that NHP's operations and programs are in compliance, in all
material respects, with all laws, rules and regulations relating to HUD-assisted
or HUD-insured properties. NHP and AIMCO are cooperating with the investigations
and do not believe  that the  investigations  will result in a material  adverse
impact on their operations.  However, as with any similar  investigation,  there
can be no assurance that these will not result in material  fines,  penalties or
other costs.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits

                  Exhibit 27, Financial Data Schedule

            b)    Reports on Form 8-K:

                  None filed during the quarter ended September 30, 2000.


<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/Patrick J. Foye
                                          Patrick J. Foye
                                          President


                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President and
                                          Controller



                                    Date: