<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, 1998


                             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, 1998 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, 1998 (UNAUDITED) AND DECEMBER 31, 1997
                                 (In Thousands)


                                                  September 30       December 31
ASSETS                                                1998               997
-------------------------------------------       ------------       -----------

Current Assets:
     Cash and cash equivalents                     $    911          $    968
     Tenants' security deposits                         442               429
     Mortgage escrow deposits                           557               648
     Prepaid expenses and other assets                  995               812
                                                   --------          --------
          Total current assets                        2,905             2,857
                                                   --------          --------
                                                                 
                                                                 
Restricted cash                                       5,847             5,388
                                                   --------          --------
                                                                 
Rental property:                                                 
     Buildings and improvements                      76,614            75,962
     Furniture and equipment                          2,562             2,521
                                                   --------          --------
                                                     79,176            78,483
       Less accumulated depreciation                (25,276)          (23,086)
                                                   --------          --------
                                                     53,900            55,397
     Land                                             3,719             3,719
                                                   --------          --------
                                                     57,619            59,116
                                                   --------          --------
                                                                 
          Total assets                             $ 66,371          $ 67,361
                                                   ========          ========


                     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)



LIABILITIES AND PARTNERS' DEFICIT                    September 30,  December 31,
                                                        1998            1997
-----------------------------------------------      ------------   ------------
                                                     (Unaudited)

Current liabilities:
     Accounts payable and accrued expenses           $     2,520    $     2,190
     Rents received in advance                                75             35
     Deposits held                                           463            438
     Accrued interest on mortgage notes payable              147            201
     Current maturities of term debt                         937          1,008
                                                     -----------    -----------

          Total current liabilities                        4,142          3,872
                                                     -----------    -----------

Term debt, less current maturities:
     Mortgage notes payable                               40,257         40,938
     Promissory notes, including accrued
        interest payable                                  28,651         27,200
                                                     -----------    -----------
                                                          68,908         68,138
                                                     -----------    -----------

Partners' deficit:
     General Partners:
       NHT, Inc.                                             (12)            (9)
       Other Operating General Partners                      (28)             5

     Limited partners:
       Issued and outstanding 1,014,668
          investment units                                (6,639)        (4,645)
                                                     -----------    -----------

                                                          (6,679)        (4,649)
                                                     -----------    -----------

          Total liabilities and partners' deficit    $    66,371    $    67,361
                                                     ===========    ===========


                     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, 1998 AND 1997
                     (In Thousands, except per Unit Amounts)


                                                           1998           1997
                                                         -------        -------
Revenues:
     Rental revenues                                     $ 2,949        $ 3,106
     Other income                                             63             86
                                                         -------        -------

        Total revenues                                     3,012          3,192
                                                         -------        -------

Expenses:
     Administration                                          394            489
     Operating and maintenance                               661            714
     Management fees                                         235            238
     Partnership asset management fees                        81             79
     Utilities                                               280            403
     Taxes and insurance                                     423            500
     Depreciation and amortization                           739            730
                                                         -------        -------

        Total expenses                                     2,813          3,153
                                                         -------        -------

        Income from rental operations                        199             39
                                                         -------        -------

Other revenues and (expenses):
     Interest income                                          53             43
     Interest expense                                       (849)          (829)
                                                         -------        -------

          Net loss                                       $  (597)       $  (747)
                                                         =======        =======


Net loss per limited partnership unit                    $ (0.59)       $ (0.74)
                                                         =======        =======


                     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, 1998 AND 1997
                    (In Thousands, except per Unit Amounts)

<TABLE>
<CAPTION>
                                                                           1998                1997
                                                                          -------             -------
Revenues:
<S>                                                                       <C>                 <C>    
     Rental revenues                                                      $ 8,825             $ 9,394
     Other income                                                             180                 276
                                                                          -------             -------

        Total revenues                                                      9,005               9,670
                                                                          -------             -------

Expenses:
     Administration                                                         1,234               1,302
     Operating and maintenance                                              2,057               2,281
     Management fees                                                          825                 842
     Partnership asset management fees                                        243                 236
     Utilities                                                              1,005               1,310
     Taxes and insurance                                                    1,300               1,486
     Depreciation and amortization                                          2,211               2,173
                                                                          -------             -------

        Total expenses                                                      8,875               9,630
                                                                          -------             -------

        Income from rental operations                                         130                  40
                                                                          -------             -------

Other revenues and (expenses):
     Interest income                                                          150                 123
     Interest expense                                                      (2,513)             (2,501)
                                                                          -------             -------

          Loss before extraordinary gain                                   (2,233)             (2,338)
          Extraordinary gain (Note B)                                         216                  --
                                                                          -------             -------

          Net loss                                                        $(2,017)            $(2,338)
                                                                          =======             =======

Loss per limited partnership unit before extraordinary gain                 (2.20)              (2.30)

Extraordinary gain per limited partnership unit                               .21                  --
                                                                          -------             -------

Net loss per limited partnership unit                                     $ (1.99)            $ (2.30)
                                                                          =======             =======
</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, 1998 AND 1997
                                (In Thousands)

<TABLE>
<CAPTION>
                                                                           1998                1997
                                                                          -------             -------
<S>                                                                       <C>                 <C>          
Cash flows from operating activities:
     Net loss                                                             $(2,017)            $(2,338)
     Adjustments to reconcile net loss to net cash
        provided by operating activities:
          Depreciation and amortization                                     2,211               2,173
          Extraordinary gain                                                 (216)                 --
          Bankruptcy related reserves                                         216                  --
          Accrued interest on promissory notes                              1,235               1,177
     Changes in operating assets and liabilities:
          Increase in deposits, prepaids and other assets                    (126)               (492)
          Increase in accounts payable and
              accrued expenses                                                330                 324
          Increase (decrease) in other current liabilities                     11                 (56)
                                                                          -------             -------
Cash provided by operations                                                 1,644                 788
                                                                          -------             -------

Investing activities:
     Additions to buildings, furniture and equipment                         (693)               (760)
     Deposits to restricted cash, net                                        (459)               (397)
                                                                          -------             -------
        Cash used for investing activities                                 (1,152)             (1,157)
                                                                          -------             -------

Financing Activities:
     General partners cash distributions                                      (13)                 --
     Proceeds from term debt                                                  216                 647
     Payments on term debt                                                   (752)               (685)
                                                                          -------             -------
       Net  cash used for financing activities                               (549)                (38)
                                                                          -------             -------

Decrease in cash and cash equivalents                                         (57)               (407)

Cash and cash equivalents beginning of  period                                968               1,313
                                                                          -------             -------

Cash and cash equivalents end of period                                   $   911             $   906
                                                                          =======             =======
</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 (Partnership) and the Operating Partnerships
in which it has acquired a significant controlling limited partnership interest.

The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the rules and regulations of the Securities and Exchange
Commission (the SEC). Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer to
the combined financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-K for the year ended December 31, 1997.

NOTE B - BANKRUPTCY - OPERATING PARTNERSHIPS

During March 1996, two Operating Partnerships which had purchased apartment
projects in Fort Worth, Texas filed for bankruptcy in the United States District
Court for the Northern District of Texas, Fort Worth Division (the "Court"). The
bankruptcy filing followed unsuccessful negotiations with the lender (HUD) and
the foreclosure actions by a Texas bank which purchased the loans from HUD.
During 1997, attempts to reorganize the Operating Partnerships were unsuccessful
and the Texas bank was permitted to complete its foreclosure actions and
purchase the apartment projects at the foreclosure sales. In connection with the
foreclosure action, the Operating Partnerships were relieved of any obligation
related to the nonrecourse mortgage debt. At December 31, 1997, the Operating
Partnerships had accumulated cash of $216,000 which was in contention amongst
the parties and, accordingly, a reserve was established pending the resolution
of the bankruptcy hearing scheduled for March 26, 1998 to determine the
ownership of the cash.

A hearing to dismiss the bankruptcy and determine the ownership of the cash was
held on March 26, 1998. The Court entered an order denying the bank's motion for
payment of cash collateral and granted the motion to dismiss the bankruptcy. The
bank filed an appeal. The Court has dismissed the bank's appeal with respect to
Springchase Operating Partnership. The bank also filed suit against Springchase
Operating Partnership in the State District Court in Dallas County Texas and
sought an injunction against Springchase Operating Partnership. The injunction
was denied by the State District Court. It is anticipated that this suit will be
resolved by the end of the year. The appeal with respect to the Trinidad
Operating Partnership is still in process. There can be no assurance as to how
these matters will be resolved, however, in the opinion of management the
Partnership should prevail and, accordingly, the resultant reserve has been
reversed and recorded as an extraordinary gain in the financial statements.
These partnerships were liquidated in 1998 paying remaining Operating
Partnership liabilities out of available Operating Partnership cash. Any cash in
excess of liabilities was distributed to the Partnership. No distributions will
be made to the Unit holders.


                                       8
<PAGE>
 
ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

General
-------

In 1988, the Partnership raised $20,293,000 in gross proceeds through a public
offering. After paying the selling, offering and organization expenses of the
offering the Partnership had $17,249,000 in net proceeds. Of the net proceeds,
$260,000 was deposited in the 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") 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. Two Operating Partnerships (see Properties below) are
being dissolved in 1998.

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 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
the 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. The Partnership elected a special option available in
1990 to accelerate the LIHTC for individuals who had an interest in the
Partnership before October 26, 1990. Qualifying Unit holders received a tax
credit of 150% of the credit otherwise allowable for the 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.

An analysis of future tax credits anticipated based upon current information and
assuming no changes in the Operating and Partnerships indicates an estimate of
future tax credits for the Qualifying Unit holders who received the 1990
acceleration to be as follows: approximately $2.65 of credit per unit in 1998;
approximately $2.12 of credit per unit in 1999; approximately $ .36 of credit
per unit in 2000; and approximately $ .20 of credit per unit in 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 will be sold in the years 2003
through 2008.

The properties are subject to substantial debt, in many cases including seller
financing on which interest has accrued since the Partnership invested in the
Properties. Most of the Properties are dependent upon continuing government
subsidies. In addition, many of the Properties are located in market areas that
would not support significant rent increases. Finally, most of the Properties
are subject to use restrictions that limit their use to low-income housing
beyond the end of the tax credit compliance period. For these and other reasons,
there can be no assurance that the sale of the Properties will produce sales
proceeds to the Operating Partnerships in excess of the debt financing and the
expenses of sale; nor can there be any assurance that distributions of the sales
proceeds, if any, from the Operating Partnerships to the Partnership will exceed
the Partnership's accumulated liabilities. Accordingly, upon sale of the
Properties, there can be no assurance that any funds will be distributed to Unit
holders or, if funds are distributed, that the funds will be sufficient to
enable Unit Holders to pay taxes arising from such sales.

The Partnership recognizes the importance of minimizing the number and
seriousness of any disruptions that may occur as a result of Year 2000 and has
adopted a compliance program. The Partnership is completing the inventory of
their information technology and other electronic assets (such as, but not
limited to, data network equipment, non-information technology systems,
including embedded systems that operate security systems, 

                                       9
<PAGE>
 
phone systems, fax systems, energy management systems and other systems) used in
the  Partnership's  business  that may be  affected  by Year 2000 issues and the
related  assessment of those assets Year 2000  compliance.  The  Partnership has
completed   their   assessment   of   their   primary   information   technology
infrastructure   and  expects  to  complete  the  inventory  and  assessment  of
substantially all of the Operating Partnerships by December 31, 1998.

The Partnership completed an analysis of its vendors and service providers that
are critical to the Partnership's business to determine whether they are Year
2000 compliant. The Partnership has requested a survey from all the Operating
Partnerships. But cannot guarantee that all vendors or service providers of the
Operating Partnerships will comply with the Operating Partnerships' surveys, and
therefore the Partnership may not be able to determine Year 2000 compliance of
those vendors or service providers. At that time, the Operating Partnerships
will determine the extent to which the Operating Partnerships will be able to
replace non-compliant vendors. Due to the lack of an alternative source, there
may be instances in which the Operating Partnerships will have no alternative
but to remain with non-compliant vendors or service providers.

The Partnership believes that their upgrading and systems replacement will be
implemented and tested by June 30, 1999. The Partnership believes that this
should provide adequate time to further correct any problems that did not
surface during the implementation and testing for those systems.

In addition to those systems within the Partnership's control, the Operating
Partnerships' control and the control of their vendors and suppliers, there are
other systems that could have an impact on the Partnership's and Operating
Partnerships' businesses and which may not be Year 2000 compliant by January 1,
2000. Those systems could affect the operations of the multi-family rental real
estate industry or the economy as a whole. These systems are outside of the
Partnership's control or influence and their compliance may not be verified by
the Partnership, however, these systems could adversely affect the Partnership's
financial condition or results of operations.

If the Partnership or Operating Partnerships are not successful in implementing
their Year 2000 compliance plan, the Partnership may suffer a material adverse
impact on their combined results of operations and financial condition. Because
of the importance of addressing the Year 2000 problem, the Partnership expects
to develop contingency plans if they determine that the compliance plans will
not be implemented by June 30, 1999.

To date, the Partnership estimates the cost not to exceed $50,000 to update
their information technology and other electronic assets. Upon receipt of the
Operating Partnerships' surveys, an estimation of the cost to become Year 2000
compliant will be made.


Properties
----------

As of September 30,1998, average occupancy of the Properties was 96%.

Two Properties located in Ft. Worth, Texas had experienced cash flow
difficulties and had experienced a decline in value. During 1993, the General
Partner resolved a dispute with a former Managing General Partner who had not
made mortgage payments on one of the properties and failed to comply with its
Operating Deficit Guarantee. Per an agreement completed in May 1993, the former
Managing General Partner paid $60,000.

Due to the nonpayment of the two properties' mortgages by the former Managing
General Partner, the mortgages were assigned to the U.S. Department of Housing
and Urban Development (HUD). 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. The General Partner attempted to negotiate
with the bank seeking a consensual agreement to restructure the debt. The bank
responded with a notice dated March 12, 1996 accelerating the maturity of the
indebtedness under the Notes, demanding payment in full and giving 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.


                                      10
<PAGE>
 
The General Partner, after evaluating the consequences of foreclosure and as
part of a strategy to minimize the effect to the investors, filed on March 26,
1996 with respect to Trinidad Apartments Limited Partnership and on March 28,
1996 with respect to Springchase Apartments Limited Partnership in the United
States District Court for the Northern District of Texas, Fort Worth Division
(the "Court"), Case #496-41284 and Case #496-4136 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 December 2, 1997, a foreclosure sale was held
and the Properties were transferred to the bank.

Because each investor's tax situation was different, the consequences of the
foreclosure was different based upon each investor's previous use of tax credits
and passive losses, and its individual tax situation. However, in general, the
foreclosure caused: 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
tax gain on disposition of the property as a result of the foreclosure. The
December 31, 1997 Schedule K-1 included a 48 cents per Unit recapture of tax
credits with a corresponding estimated interest charge of 23 cents per unit. The
passive gain relating to the disposition of the two Properties as a result of
foreclosure was less than the 1997 passive losses passed through from the
remaining 29 Operating Partnerships. Future tax credits will be reduced in each
of 1998, 1999, 2000, and 2001 by the loss of the two Properties' credits. (For
an estimate of future credits after this reduction see General above in the
MD&A.)

The hearing to dismiss the bankruptcy was held on March 26, 1998. The Court
entered an order denying the bank's motion for payment of cash collateral and
granted the motion to dismiss the bankruptcy. The bank filed an appeal to
preserve its rights to file an appeal. The Court has dismissed the bank's appeal
with respect to Springchase Operating Partnership. The bank also filed suit
against Springchase Operating Partnership in the State District Court in Dallas
County Texas and sought an injunction against Springchase Operating Partnership.
The injunction was denied by the State District Court. The appeal with respect
to the Trinidad Operating Partnership is still in process. There can be no
assurance as to how these matters will be resolved. These partnerships were
liquidated in 1998 paying remaining Operating Partnership liabilities out of
available Operating Partnership cash. Any cash in excess of liabilities was
distributed to the Partnership. No distributions will be made to Unit holders.


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

Liquidity is defined as an entity'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 Partnership reserve, or
managing 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.

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. The Multifamily Assisted
Housing Reform and Affordability Act of 1997, 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 subsidized rent levels may be reduced
to market levels and the debt may

                                      11
<PAGE>
 
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% or 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 the 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 fifteen Properties whose Section 8 contracts have
or will expire in fiscal year 1998 or 1999, of which two have rents in excess of
120% of FMRs. The Section 8 contracts for fourteen of these fifteen Properties
have been or are expected to be renewed with HUD until at least the end of
fiscal year 1999. One Property that originally submitted to the HUD portfolio
reengineering program has now withdrawn from the program and is seeking renewal
of their Section 8 contract. In addition, three other Properties owned by the
Operating Partnerships have Section 8 contracts with rents in excess of 120% of
FMRs that expire after fiscal year 1999. 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 required or appropriate, the General
Partner will participate in the program to restructure loans and rent subsidies.

These policy and program 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
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 Partnership.

At September 30, 1998, restricted cash was $5,847,000. The restricted cash was
composed of the Partnership reserve of $535,000 and Operating Partnership
reserves of $5,312,000. The 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 Partnership reserve has been
available to fund obligations of the Partnership, including the management fee
payable by the Partnership to the General Partner. As of December 31, 1997 the
General Partner had voluntarily deferred payment of $378,000 of its management
fee due to a reduced level of the Partnership reserve. There can be no assurance
that the 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. Deposits and
withdrawals from the Operating Partnership reserves are generally regulated by a
governing federal, state or local agency.

Low-income housing projects frequently generate limited cash flow and,
therefore, the potential for cash flow deficits exists. The General Partner does
not anticipate that the Partnership will distribute cash to Unit holders in
circumstances other than refinancing or disposition of its investments in the
Operating Partnerships, and there can be no assurance of such distributions in
the event of refinancing or disposition.

                                      12
<PAGE>
 
Results of Operations
---------------------

The September 30, 1998 net loss of $2,017,000 decreased 13.7% from the September
30, 1997 net loss of $2,338,000.  The reasons for the  differences are discussed
below.

An extraordinary gain of $216,000 was recorded in 1998 as a result of matters
related to the foreclosure and debt extinguishment on the two Fort Worth, Texas
properties (see Note B).

Total revenue decreased $665,000 (6.9%) when comparing the nine months ended
September 30, 1998 and 1997. The decrease in rental revenue related to the loss
of operations from the two Texas properties. After considering this decrease of
revenue, the other properties' rental revenue increased an average of 2.2%.

Total expenses exclusive of depreciation and interest for the nine months ended
September 30, 1998 and 1997 were $6,664,000 and $7,457,000, respectively. The
$793,000 (10.6%) decrease in expenses between 1998 and 1997 primarily related to
a decrease in expenses related to the loss of operations from the two Texas
properties. After considering this decrease in expenses related to these two
properties the average increase in expenses is 0.1%. The expenses with the
largest fluctuations are taxes and insurance with a decrease of 5.7% and
administrative with an increase of 6.9%.

In recent years, rental income, after the HUD rent adjustments, has not been
increasing at a rate equivalent to increases in expenses (excluding depreciation
and interest). 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 in HUD
programs, future increases in subsidy income may be limited. Overall, most of
the Properties are in good physical condition after taking into account the
planned repairs and maintenance discussed above and are producing positive cash
flow.


                                      13
<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


                                      14
<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, 1998                   By /s/ James A. Bowman   
       ------------------                     ----------------------------------
                                              James A. Bowman
                                              President, NHT, Inc.



Date    November 10, 1998                  By /s/ Susan E. Basting              
        ------------------                    ----------------------------------
                                              Susan E. Basting
                                              Treasurer, NHT, Inc.


                                      15