<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q
                                        
                  QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
                    of the Securities Exchange Act of 1934
                   for the quarter ended September 30, 1997


                            Commission File Number
                                    0-17669
                                    -------

                                        
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
                       (A Delaware Limited Partnership)
                                        

                I.R.S. Employer Identification No.  04-2981989
                                                    ----------

                  2335 North Bank Drive, Columbus, OH  43220
      Registrant's Telephone Number, Including Area Code:  (614) 451-9929


       Securities Registered Pursuant to Section 12(b) of the Act:  None
          Securities Registered Pursuant to Section 12(g) of the Act:

                     Units of Limited Partnership Interest



Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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   
                                   -----     ----- 
                                        

                                       1
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
                        A DELAWARE LIMITED PARTNERSHIP
                         SEPTEMBER 30, 1997 FORM 10-Q
                                        
                               TABLE OF CONTENTS
                                        
                                        

PART I  FINANCIAL INFORMATION                                           PAGE NO.
-----------------------------                                           --------

Item 1.   Unaudited Combined Financial Statements

      Combined Balance Sheets...............................................3
 
      Combined Statements of Operations.....................................5
 
      Combined Statements of Cash Flows.....................................7
 
      Notes to Combined Financial Statements................................8
 
Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results
          of Operations.....................................................9
 
PART II  OTHER INFORMATION
--------------------------
 
      Other Information....................................................14
 
      Signatures...........................................................15
 

                                       2
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
           AND ITS SUBSTANTIALLY WHOLLY-OWNED OPERATING PARTNERSHIPS
 COMBINED BALANCE SHEETS SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
                                (In Thousands)



<TABLE>
<CAPTION>
 
                                                      September 30       December 31
ASSETS                                                    1997              1996
-------------------------------------------        ----------------  ----------------
<S>                                                <C>               <C> 
Current Assets:                                                      
     Cash and cash equivalents                     $            906  $          1,313
     Tenants' security deposits                                 459               446
     Mortgage escrow deposits                                   689               620
     Prepaid expenses and other assets                        1,141               731
                                                   ----------------  ----------------
          Total current assets                                3,195             3,110
                                                   ----------------  ----------------
                                                                     
                                                                     
Assets limited as to use                                      5,543             5,146
                                                   ----------------  ----------------
                                                                     
Rental property:                                                     
     Buildings and improvements (Note B)                     76,635            75,900
     Furniture and equipment                                  2,548             2,523
                                                   ----------------  ----------------
                                                             79,183            78,423
       Less accumulated depreciation                        (22,530)          (20,379)
                                                   ----------------  ----------------
                                                             56,653            58,044
     Land                                                     3,968             3,968
                                                   ----------------  ----------------
                                                             60,621            62,012
                                                   ----------------  ----------------
Prepaid land leases, less current                                    
     maturities                                                  50                72
                                                   ----------------  ----------------
                                                                     
          Total assets                             $         69,409  $         70,340
                                                   ================  ================
</TABLE>

 
                    The accompanying notes are an integral
                  part of the combined financial statements.

                                       3
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
           AND ITS SUBSTANTIALLY WHOLLY-OWNED OPERATING PARTNERSHIPS
                      COMBINED BALANCE SHEETS, CONTINUED
                    (In Thousands, except Investment Units)

<TABLE>
<CAPTION>

LIABILITIES AND PARTNERS' CAPITAL                   September 30,     December 31,
                                                        1997              1996
--------------------------------------------     ----------------  ----------------
                                                     (Unaudited)  
<S>                                              <C>               <C> 
Liabilities not subject to compromise:                            
Current liabilities:                                              
     Accounts payable and accrued expenses       $          2,268  $          1,944
     Rents received in advance                                 45                36
     Deposits held                                            486               461
     Accrued interest on mortgage notes                           
       payable                                                165               255
     Current maturities of term debt                          855               933
                                                 ----------------  ----------------
                                                                  
          Total current liabilities                         3,819             3,629
                                                 ----------------  ----------------
                                                                  
Term debt, less current maturities:                               
     Mortgage notes payable                                41,296            41,903
     Promissory notes, including accrued                          
        interest payable                                   26,717            24,893
                                                 ----------------  ----------------
                                                           68,013            66,796
                                                 ----------------  ----------------
                                                                  
                                                                  
Liabilities subject to compromise (Note C):                 3,608             3,608
                                                 ----------------  ----------------
                                                                  
Partners' capital:                                                
     General Partners:                                            
       NHT, Inc.                                              (10)               (8)
       Other Operating General Partners                       (10)               14
                                                                  
     Limited partners:                                            
       Issued and outstanding  1,014,668                          
          investment units                                 (6,011)           (3,699)
                                                 ----------------  ----------------
                                                                  
                                                           (6,031)           (3,693)
                                                 ----------------  ----------------
          Total liabilities and partners'        
           capital                               $         69,409  $         70,340                  
                                                 ================  ================
</TABLE>

 
                    The accompanying notes are an integral
                  part of the combined financial statements.

                                       4
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
           AND ITS SUBSTANTIALLY WHOLLY-OWNED OPERATING PARTNERSHIPS
                 COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                    (In Thousands, except per Unit Amounts)



<TABLE>
<CAPTION>
                                                       1997              1996
                                                ----------------   -------------
<S>                                             <C>                <C> 
Rental revenues:                                                  
     Rental revenues                            $          3,106   $       3,029
     Other income                                             86             130
                                                ----------------   -------------
                                                                  
        Total revenues                                     3,192           3,159
                                                ----------------   -------------
                                                                  
Rental expenses:                                                  
     Administration                                          489             374
     Operating and maintenance                               714             851
     Management fees                                         238             242
     Utilities                                               403             408
     Taxes and insurance                                     500             500
     Depreciation and amortization                           730             687
                                                ----------------   -------------
                                                                  
        Total expenses                                     3,074           3,062
                                                ----------------   -------------
                                                                  
        Income from operations                               118              97
                                                ----------------   -------------
                                                                  
Other revenues and (expenses):                                    
     Interest income                                          43              89
     Interest expense                                       (829)           (808)
     Partnership management fees                             (79)            (75)
                                                ----------------   -------------
                                                                  
          Net loss                              $           (747)  $        (697)
                                                ================   =============
                                                                  
                                                                  
Net loss per limited partnership unit           $          (0.74)  $       (0.69)
                                                ================   =============
</TABLE>



                    The accompanying notes are an integral
                  part of the combined financial statements.

                                       5
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
           AND ITS SUBSTANTIALLY WHOLLY-OWNED OPERATING PARTNERSHIPS
                 COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                    (In Thousands, except per Unit Amounts)



<TABLE>
<CAPTION>
                                                       1997              1996
                                                ----------------   -------------
<S>                                             <C>                <C> 
Rental revenues:                                                  
     Rental revenues                            $          9,394   $       9,208
     Other income                                            276             303
                                                ----------------   -------------
                                                                  
        Total revenues                                     9,670           9,511
                                                ----------------   -------------
                                                                  
Rental expenses:                                                  
     Administration                                        1,302           1,165
     Operating and maintenance                             2,281           2,258
     Management fees                                         842             784
     Utilities                                             1,310           1,293
     Taxes and insurance                                   1,486           1,473
     Depreciation and amortization                         2,173           2,174
     Impairment loss (Note B)                                  -           2,300
                                                ----------------   -------------
                                                                  
        Total expenses                                     9,394          11,447
                                                ----------------   -------------
                                                                  
        Income (loss) from operations                        276          (1,936)
                                                ----------------   -------------
                                                                  
Other revenues and (expenses):                                    
     Interest income                                         123             143
     Interest expense                                     (2,501)         (2,576)
     Partnership management fees                            (236)           (225)
                                                ----------------   -------------
                                                                  
          Net loss                              $         (2,338)  $      (4,594)
                                                ================   =============
                                                                  
                                                                  
Net loss per limited partnership unit           $          (2.30)  $       (4.53)
                                                ================   =============
</TABLE>


                    The accompanying notes are an integral
                  part of the combined financial statements.

                                       6
<PAGE>
 
                  NATIONAL HOUSING TRUST LIMITED PARTNERSHIP
           AND ITS SUBSTANTIALLY WHOLLY-OWNED OPERATING PARTNERSHIPS
                 COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                (In Thousands)

<TABLE>
<CAPTION>
                                                       1997            1996
                                                 -------------   -------------
<S>                                              <C>             <C> 
Cash flows from operating activities:                           
     Net loss                                    $      (2,338)  $      (4,594)
     Adjustments to reconcile net loss to                       
      net cash provided by operating                            
        activities:                                             
          Impairment loss                                    -           2,300
          Depreciation and amortization                  2,173           2,174
          Accrued interest on promissory                 1,177           1,029
           notes                                                
     Changes in operating assets and                            
         liabilities:                                           
     Increase in deposits,                                      
          prepaids and other assets                       (492)           (192)
     Increase  in accounts payable                              
          and accrued expenses                             324             309
     (Decrease) increase in other current                       
           liabilities                                     (56)            117
Cash provided by  operations                               788           1,143
                                                 -------------   -------------
Investing activities:                                           
     Additions to buildings, furniture and                      
        equipment, net                                    (760)           (408)
     Additions to assets limited as                             
        to use, net                                       (397)           (141)
                                                 -------------   -------------
                                                                
        Cash used for investing activities              (1,157)           (549)
                                                 -------------   -------------
Financing activities:                                           
     General partners cash distributions                     -             (32)
     General partners cash contributions                     -              21
     Additions to term debt                                647              55
     Payments of term debt                                (685)           (613)
                                                 -------------   -------------
       Net  cash used for                                       
          financing activities                             (38)           (569)
                                                 -------------   -------------
     (Decrease) increase in cash and                            
        cash equivalents                                  (407)             25
Cash and cash equivalents beginning                             
     of  period                                          1,313           1,130
                                                 -------------   -------------
Cash and cash equivalents end                                   
     of period                                   $         906   $       1,155
                                                 =============   =============
</TABLE>


                    The accompanying notes are an integral
                  part of the combined financial statements.

                                       7
<PAGE>
 
                NATIONAL HOUSING TRUST LIMITED PARTNERSHIP AND
             ITS SUBSTANTIALLY WHOLLY OWNED OPERATING PARTNERSHIPS
                                  (UNAUDITED)
                    NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A--BASIS OF PRESENTATION

The accompanying combined financial statements include the accounts of National
Housing Trust Limited Partnership (Investment Partnership) and the Operating
Partnerships in which it has acquired a significant limited partnership
interest.

The information furnished reflects all adjustments (all of which were of a
normal recurring nature) which are, in the opinion of management, necessary to
fairly present the combined financial position, results of operations, and cash
flows on a consistent basis.

The accompanying unaudited combined financial statements are presented in
accordance with the requirements for Form 10-Q and consequently do not include
all disclosures normally required by generally accepted accounting principles.
Reference should be made to the Partnership's 1996 Annual Report on Form 10-K
for additional disclosures including a summary of the Partnership's accounting
policies which are not significantly different.

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share,  which is required to be adopted on December 31, 1997.
Management does not expect Statement 128 to impact the financial statements.

NOTE B--IMPAIRMENT OF LONG-LIVED ASSETS

The Investor Partnership has two Fort Worth, Texas Operating Partnerships which
had been in default of their mortgage obligations for their two properties with
mortgages held by HUD.

In November 1995, the General Partner was notified that the mortgage loans on
these two properties had been acquired from HUD by a Texas bank, which demanded
that the mortgages be brought current immediately.  On March 14, 1996, the bank
notified the General Partner that the properties would be foreclosed upon if the
related mortgages were not paid in full by April 2, 1996.  On March 26 and 28,
1996, the General Partner filed a petition for relief under Chapter 11 of the
Bankruptcy Code for each of the two Operating Partnerships.

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the assets'
carrying amount.  The impairment loss is measured by comparing the fair value of
the asset to its carrying amount.  The Investment Partnership adopted Statement
121 in the first quarter of 1996, and as a result of the bankruptcy referred to
above,  an impairment loss of $2.3 million related to the two properties was
charged against operations in first quarter 1996.  The fair value was based on
the purchase price of the mortgages of the two Operating Partnerships.

The December 31, 1996 financial statements for these two properties were audited
by other auditors who expressed uncertainty in their audit reports about the
ability of these two operating partnerships to continue as going concerns.  A
bankruptcy hearing was commenced on June 5, 1997, continued on July 21, 1997 and
August 20, 1997 and on October 22, 1997 the court entered an order denying
confirmation of the plans of reorganization and granted the bank relief from the
automatic stay of foreclosure.  A foreclosure date of December 2, 1997 was
posted.  On October 30, 1997, the General Partner filed a notice of appeal and
intends to seek a stay of foreclosure.  In the event these two properties are
unable to successfully 

                                       8
<PAGE>
 
reorganize as a result of the Chapter 11 filings, the related impact is not
expected to be material to the Investment Partnership, which expects to continue
to operate as a going concern entity.

Further, if the lender is successful in its foreclosure proceedings, the debt
and related accrued interest would be recorded as an extraordinary gain in the
period the foreclosure is consummated.  A foreclosure or sale of the properties
would result in adverse tax consequences to the investors of the Investment
Partnership, including the recapture of a portion of the low income tax credits
allocated to these two properties as well as a reduction of tax credits in
future years. (See further discussion in Management's Discussion and Analysis of
Financial Condition and Results of Operations.)


NOTE C--LIABILITIES SUBJECT TO COMPROMISE

On March 26 and 28, 1996, the two Fort Worth, Texas Operating Partnerships (see
Note B) filed petitions for relief under Chapter 11 of the Bankruptcy Code in
the Northern District of Texas, Fort Worth Division.

Under Chapter 11, certain claims (including the mortgage notes payable) against
each of the Operating Partnerships in existence prior to the filing are
automatically stayed while the Operating Partnerships continues business
operations as a debtor-in-possession.  The claims have been reflected in the
accompanying balance sheet as "liabilities subject to compromise".  Additional
claims may arise subsequent to the filing date resulting from various sources,
including a determination of allowed claims by the bankruptcy court.  These
additional claims will be reflected as "liabilities subject to compromise" when
the likelihood of the claim is probable and the allowed claim can be reasonably
estimated.

Liabilities subject to compromise consist of the following as of September 30,
1997:
<TABLE>
<CAPTION> 

<S>                                               <C>
Mortgage notes payable                            $2,742,000 
Accrued interest mortgage notes payable              381,000
Promissory notes                                     353,000
Accounts payable and accrued expenses                132,000
                                                  ----------
 
                                                  $3,608,000
                                                  ==========
</TABLE>


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

General
-------

In 1988, the Investment Partnership raised $20,293,000 in gross proceeds through
a public offering.  Upon paying the selling, offering and organization expenses
of the offering the Investment Partnership had $17,249,000 in net proceeds.  Of
the net proceeds, $260,000 was deposited in the Investment Partnership reserve
and $16,989,000 was invested in 31 Operating Partnerships.  The 31 Operating
Partnerships that were acquired own low-income housing developments (the
"Properties") that were eligible for the low-income housing tax credit.  One of
the Properties was also eligible for the historic rehabilitation tax credit.
The 31 acquisitions occurred from October 1988 through March 1990.

Each Operating Partnership's Property qualifies for the low-income housing tax
credit (LIHTC).  The LIHTC  was created by the 1986 Tax Reform Act and is
governed by Section 42 of the Internal Revenue Code. The Investment Partnership
serves as a conduit of the Operating Partnerships' tax credits, passive losses,
portfolio income and other tax information to the holders of Units of limited
partnership interest in 

                                       9
<PAGE>
 
the Investment Partnership (the "Unit holders"). The tax credits are allocated
to the Unit holders for 10 years after a property has been placed in service and
rented up. The tax credits were first allocated to Unit holders in 1988 and are
anticipated to continue until 2001. In addition, in order for a Property to
qualify for the tax credits, the Property must be utilized as a low-income
property for 15 years before it can be sold. The General Partner anticipates the
Properties to be sold between the years 2003 through 2008.

The Investment Partnership elected a special option available in 1990 to
accelerate the LIHTC for individuals who had an interest in the Investment
Partnership before October 26, 1990. Qualifying Unit holders received a tax
credit of 150% of the credit otherwise allowable for the first tax year ending
December 31, 1990. The remaining tax credit available for 1991 and subsequent
tax years is being reduced on a pro rata basis by the amount of the 1990
increased credit. Non-qualifying Unit holders will receive the original
unaccelerated tax credit for the remaining qualifying tax years of their
investment.

Properties
----------

Two properties located in Ft. Worth, Texas have experienced cash flow
difficulties and a decline in value (See Footnotes B and C of the Combined
Financial Statements).  During 1993, the General Partner resolved a dispute with
a former Managing General Partner of the Operating Partnerships, who had not
made mortgage payments on one of the properties and failed to comply with its
Operating Deficit Guarantee.  An agreement completed in May 1993 required the
former Managing General Partner to make a lump sum payment of $20,000 and
continue to pay an additional amount totaling $40,000 over 36 months.  All these
payments have been received.

Due to the nonpayment of the two properties' mortgages by the former Managing
General Partner, the U.S. Department of Housing and Urban Development (HUD)
assumed the mortgages.  In September 1995, HUD auctioned off the mortgage loans
for these properties.  The General Partner bid on the mortgage loans, but a
Texas bank was the successful bidder.  With respect to one property, the bank
demanded by letter received November 13, 1995, that the loan be brought current
by December 4, 1995 and threatened to foreclose if payment was not received by
that date.  The Operating Partnerships did not have sufficient capital to bring
the mortgages current.  By letter proposal on November 22, 1995, the General
Partner commenced negotiation with the bank seeking a consensual agreement to
restructure the debt.  The bank responded with a counter proposal on February
22, 1996.  The General Partner evaluated the bank's proposal, found it
unworkable, and responded with a counter proposal on March 14, 1996.  The
General Partner received notice later that same day, by letter dated March 12,
1996, that the bank accelerated the maturity of the indebtedness under the
Notes, demanded payment in full and gave notice that if the indebtedness is not
paid in full, the bank would cause the trustee under the deeds of trust securing
the Notes to conduct a foreclosure sale on April 2, 1996.  The General Partner
evaluated the consequences of foreclosure on the investors and has continued to
employ actions to minimize such consequences.

The General Partner filed on March 26, 1996 for Trinidad Apartments Limited
Partnership and on March 28, 1996 for Springchase Apartments Limited Partnership
in the Northern District of Texas, Fort Worth Division, Case #496-41284 and Case
#496-41316 respectively, petitions for relief under Chapter 11 to enable the
Operating Partnerships to reorganize. A hearing was commenced on June 5, 1997
and was continued on July 21, 1997 and August 20, 1997.   On October 22, 1997,
the Court entered  an order denying confirmation of the plans of reorganization
and granted the bank relief from the automatic stay of foreclosure.  On October
30, 1997, the General Partner filed a notice of appeal.  On November 10, 1997,
the General Partner received a notice of posting for a December 2, 1997
foreclosure.  The General Partner on November 10, 1997 filed a designation of
record and statement of issues on appeal and intends to seek a stay of
foreclosure pending the appeal to prevent foreclosure by the bank.  If the
General Partner is unsuccessful in obtaining the stay, then a foreclosure would
be likely in December of 1997 or the first quarter of 1998.

The consequences of foreclosure would include: a recapture of a portion of the
tax credits previously received by the investors; the reduction of tax credits
in future years; an interest charge under the Internal Revenue Code on tax
credits recaptured; and a potential tax on disposition of the property as a
result of the foreclosure. Assuming the foreclosure is completed in 1997, the
recapture of tax credits is estimated to be 

                                       10
<PAGE>
 
approximately 50 cents per unit with a corresponding estimated interest charge
of approximately 24 cents per unit. In addition, the 1997 and future tax credits
would be reduced by the loss of the two properties' credits estimated to be
approximately 19 cents per unit for 1997. The passive gain relating to the
disposition of the property as a result of foreclosure is expected to be less
than the 1997 passive losses passed through from the remaining 29 Operating
Partnerships. Each investors' tax situation is different, and the consequences
of foreclosure could be different based upon each investor's previous use of tax
credits, passive losses, and individual tax situation. In general, a foreclosure
in 1997 could result in a reduction of an investor's tax credit return from
approximately 14% to approximately 10% in 1997 and to approximately 13% each
year thereafter through the year 2000.

As of September 30, 1997,  average occupancy of the Properties was 95%.

Results of Operations
---------------------

The September 30, 1997, net loss of $2,338,000 decreased 49.1% from the
September 30, 1996, net loss of $4,594,000.  The reasons for the difference are
discussed below.

An impairment loss of $2,300,000 was recorded in first quarter 1996 for the two
Fort Worth, Texas properties as required by FAS 121 (see Note B).

Total revenue increased $159,000 or 1.7% when comparing the nine months ended
September 30, 1997 and 1996.

Total rental expenses exclusive of depreciation and impairment loss for the nine
months ended September 30, 1997 and 1996 are $7,221,000 and $6,973,000,
respectively.  The $248,000 (3.6%) increase in rental expenses between 1997 and
1996 was due primarily to a $137,000 (11.8%) increase in administrative expense,
a $58,000 (7.4%) increase in management fee expense, and a $53,000 (1.0%)
increase in operating and maintenance, utilities and taxes and insurance
expenses.

The administrative expense increase is primarily related to increases from seven
properties relating to increased legal, advertising, bad debts and office
salaries and expenses.  The management fee increase is primarily related to the
payment of incentive management fees for five of the properties in first quarter
1997.

To date, inflation has not had a significant impact on the Partnerships'
combined operations.  However, rent levels of the Properties are generally
limited by the requirements of the low-income housing tax credit and are subject
to strict governmental regulation. In the event of significant inflation, the
Operating Partnerships may be unable to increase rents sufficiently to
compensate for increases in expenses.  Due to the changes and proposed changes
in HUD programs, future increases in subsidy income may be limited.  Overall,
the Properties are in good physical condition after taking into account the
planned repairs and maintenance discussed above, they are producing positive
cash flow and the managing general partners and management companies are
consistently seeking means to improve operational results.

Capital Resources and Liquidity
-------------------------------

Liquidity is defined as an Operating Partnership's ability to meet its current
and long-term financial obligations. If a Property were to lose its governmental
rent, interest subsidy or mortgage insurance, the Operating Partnership holding
such Property might be unable to fund expenses on an ongoing basis.

Liquidity shortfalls might be covered by new federal governmental subsidy
programs, by state and local agencies, by funds from the Investment Partnership
reserve, or general partner operating deficit guarantees, although there is no
assurance that such sources would be available or, if available, sufficient to
cover any liquidity shortfall. A liquidity shortfall, for whatever reason, might
result in a sale, refinancing, or foreclosure of the property, any one of which
could have material adverse tax consequences to a Unit holder, including a
partial recapture of previously allocated low-income housing  tax credits.

                                       11
<PAGE>
 
Material changes have been made and additional changes have been proposed by
various Members of Congress and the Clinton Administration in the programs of
the U.S. Department of Housing and Urban Development. Public Law 105-65,
effective October 1, 1997, continued for fiscal year 1998 (October 1, 1997
through September 30, 1998) a debt restructuring demonstration first enacted for
fiscal year 1997. Under the demonstration program, HUD provides short-term
renewals for Section 8 assistance contracts so long as the subsidized rents on
the properties do not exceed 120% of HUD-published Fair Market Rents (FMRs) for
the market areas in which the properties are located. With respect to most
properties with rents in excess of 120% of FMRs and Section 8 contracts that
expire in fiscal year 1998, Public Law 105-65 provides that subsided rent levels
may be reduced to market levels and the debt may be restructured into two
mortgages. The first mortgage is set at a level supportable by the lower
subsidized rents, and the second mortgage is payable only out of cash flow after
other approved expenses and sale or refinancing proceeds. In many cases, the
rent subsidies will become tenant-based, meaning that the subsidies may move
with the tenants. However, for certain projects, such as those that
predominately serve elderly or disabled families or are located in markets with
an inadequate supply of affordable housing, the rent subsidies may continue to
be project-based.

Participation in the restructuring program is voluntary, in that the owner may
decline to extend the Section 8 assistance contract.  Owners who have engaged in
adverse financial or managerial actions are barred from participating in the
restructuring program.

The demonstration program becomes a permanent program in fiscal year 1999.
Whereas the demonstration program is limited to properties with rents in excess
of 120% of FMRs, the permanent program will be applicable to all projects with
rents above those of comparable properties in local markets.  HUD will enter
into contracts to carry out the restructuring with state housing finance
agencies and others who will have authority to set rents above comparable rents
for 20% of their inventory each year.  These rents would be based on approved
project budgets, and would be capped at 120% of FMRs, except for up to 5% of the
inventory, which could have budget-based rents above 120% of FMRs based on a
showing of special need.

The Operating Partnerships own eleven Properties whose Section 8 contracts
expire in fiscal year 1998 of which four have rents in excess of 120% of FMRs.
The Section 8 contracts for these eleven Properties have been or are expected to
be renewed with HUD until at least the end of fiscal year 1998.  In addition,
two other Properties owned by Operating Partnerships have Section 8 contracts
with rents in excess of 120% of FMRs that expire after fiscal year 1998.  In a
number of other Properties, rents may be above comparable rents as determined by
HUD and therefore could be subject to HUD restructuring.  The General Partner
will seek to renew all expiring Section 8 contracts, and if appropriate, the
General Partner will participate in the program to restructure loans and rent
subsidies.

The ramifications of these changes could affect demand for and cash flow of many
of the Properties, as well as potentially create debt forgiveness taxable
income. Moreover, a shift to tenant-based subsidies could lead over time to
lower occupancies and lower rents, adversely affecting cash flow.  The General
Partner is preparing for the potential impact of the restructuring of HUD
programs and is monitoring the development of HUD policy guidance and additional
proposed legislation.  The General Partner is unable to predict with certainty
the impact of HUD program restructuring on the Operating Partnerships, but it is
possible that a restructuring could have a material adverse effect on one or
more of the Operating Partnerships, which in turn could have a material adverse
effect on the Investment Partnership.

At September 30, 1997 assets limited as to use were $5,543,000.  The assets were
composed of the Investment Partnership reserve of  $343,000 and Operating
Partnership reserves of $5,200,000.  The Investment Partnership reserves are
available to fund repairs and maintenance as well as operational expenses, while
the reserves maintained by an Operating Partnership are typically available only
for the Property owned by such Operating Partnership.  Historically, the
Investment Partnership reserve has been available to fund obligations of the
Investment Partnership, including the management fee payable by the Investment
Partnership to the General Partner.  In 1996 the General Partner deferred
payment of $195,000 

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<PAGE>
 
of its Management Fee due to a reduced level of the Investment Partnership
Reserve. In light of the current level, the General Partner is again considering
deferring payment of a portion of its fee in 1997 to maintain an appropriate
level of Investment Partnership reserve. There can be no assurance, however,
that the Investment Partnership reserve will be sufficient to satisfy the
liquidity requirements of any given Operating Partnership in the event that the
reserves of such Operating Partnership are insufficient for this purpose.
The deposits and withdrawals from the Operating Partnership reserves are
generally regulated by a governing federal, state or local agency.

Low-income housing projects typically generate limited cash flow and, therefore,
the potential for cash flow deficits exists.  The General Partner does not
anticipate that the Investment Partnership will distribute cash to Unit holders
in circumstances other than refinancing or disposition of its investments in the
Operating Partnerships.

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<PAGE>
 
PART II.  OTHER INFORMATION
---------------------------


ITEM 1.           LEGAL PROCEEDINGS

                  None

ITEM 2.           CHANGES IN SECURITIES

                  None

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

                  None

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS

                  None

ITEM 5.           OTHER INFORMATION

                  None

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  None

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<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized


                          National Housing Trust Limited Partnership
                          ------------------------------------------
                                    (Registrant)



Date   November 10, 1997                    By /s/ Charles R. Santer
       ------------------                      --------------------------------
                                               Charles R. Santer
                                               President, NHT, Inc.


Date    November 10, 1997                   By /s/ Susan E. Basting
        ------------------                     --------------------------------
                                               Susan E. Basting
                                               Treasurer, NHT, Inc.

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