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

                                    FORM 10-Q


(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange Act of 1934


For the period ended     September 30, 2001


[ ] 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  0-13520


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)


                          Massachusetts                    04-2828131
                (State or other jurisdiction of         (I.R.S. Employer
               incorporation or organization)          Identification No.)


                      100 Second Avenue, Needham, MA          02494
               (Address of principal executive offices)    (Zip Code)


        Registrant's telephone number, including area code (781) 444-5251


      --------------------------------------------------------------------
                   Former address, if changed from last report

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Sections 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. [X] Yes [ ] No

                            Exhibits Index on Page 25

                                  Page 1 of 26
<PAGE>

<TABLE>
<CAPTION>


                               LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                                   (A Massachusetts Limited Partnership)

                                                   INDEX


                                                                                                      Page
<S>     <C>                                                                                        <C>

Part I:  Financial Information

Item 1.  Financial Statements:

         Statement of Net Assets in Liquidation, September 30, 2001 and
         December 31, 2000                                                                              3

         Statement of Changes of Net Assets in Liquidation for the
         Nine months Ended September 30, 2001                                                           4

         Statement of Operations for the Three Months and Nine Months Ended September 30, 2000          5

         Statement of Cash Flows for the Nine Months Ended September 30, 2000                         6-7

         Notes to Financial Statements                                                               8-17

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                                  18-24

Item 3.  Quantitative and Qualitative Disclosure about Market Risk -
         Disclosure not applicable

Part II: Other Information

Item 3.  Defaults Upon Senior Securities                                                               25

</TABLE>


                                       2
<PAGE>

<TABLE>
<CAPTION>


                         LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                             (A Massachusetts Limited Partnership)

                            STATEMENT OF NET ASSETS IN LIQUIDATION



                                                             (Unaudited)          (Audited)
                                                            September 30,        December 31,
                                                                 2001                2000
                                                            -------------       -------------
<S>                                                           <C>                 <C>
Assets (Liquidation Basis):

  Cash and cash equivalents                                    $449,243            $376,286
  Restricted cash                                                58,696             147,103
  Investments in Local Limited Partnerships                     109,396             296,910
                                                               --------            --------
    Total Assets                                               $617,335            $820,299
                                                               ========            ========

Liabilities (Liquidation Basis):

  Purchase Money Notes and accrued interest liabilities        $ 10,198            $ 51,983
  Accounts payable to affiliates                                384,271             386,271
  Accounts payable                                                 --                 3,596
  Accrued expenses                                              216,669             375,250
  Interest payable                                                  841                 841
                                                               --------            --------
    Total liabilities                                           611,979             817,941
                                                               --------            --------

Net Assets in Liquidation                                      $  5,356            $  2,358
                                                               ========            ========

<FN>
          The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                       3
<PAGE>

<TABLE>
<CAPTION>


                                         LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                                            (A Massachusetts Limited Partnership)

                                      STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
                                  For the period from January 1, 2001 to September 30, 2001
                                                         (Unaudited)


<S>                                                                    <C>                    <C>                  <C>
Net Assets in liquidation at December 31, 2000                                                                      $  2,358

Operating Activities
  Interest income                                                                              $ 14,174
                                                                                               --------

Operating Expenses
  Purchase Money Note interest - increase in
    accrual                                                             $   (319)
  Other operating expenses                                               (11,161)               (11,480)
                                                                        --------               --------
    Sub-total operating activities                                                                                    2,694

Liquidating Activities
  Increase in investment in Local Limited Partnerships                                              319
  Change in estimated liquidation value
    Estimated sales price                                                148,500
    Actual sales price                                                   148,485                    (15)
                                                                        --------               --------
      Sub-total liquidating activities                                                                                  304
                                                                                                                    -------
Net Assets in liquidation at September 30, 2001                                                                     $ 5,356
                                                                                                                    =======


<FN>
                    The  accompanying  notes  are  an  integral  part  of  these financial statements.
</FN>
                                                              4

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                 LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                                    (A Massachusetts Limited Partnership)

                                           STATEMENT OF OPERATIONS
                                                 (Unaudited)

                                                                For the Three               For the Nine
                                                                Months Ended                Months Ended
                                                             September 30, 2000          September 30, 2000
                                                             -------------------        --------------------
<S>                                                            <C>                         <C>
Interest income                                                 $     3,733                 $    13,899
Expenses:
  Interest expense                                                  201,690                     560,962

  General and administrative expenses:
    Affiliates                                                       24,500                      73,500
    Other                                                            18,011                      27,001
                                                                -----------                 -----------
  Total expenses                                                    244,201                     661,463
                                                                -----------                 -----------

Loss before other income and equity in income of Local
  Limited Partnership investments                                  (240,468)                   (647,564)

Other income:
  Gain on sale of investment in Osuna Apartments                     (1,800)                  2,432,299
                                                                -----------                 -----------

Income (loss) before equity in income of Local Limited
  Partnership investments                                          (242,268)                  1,784,735


Equity in income (loss) of Local Limited Partnership
  investments                                                       (12,011)                    109,599
                                                                -----------                 -----------

Net income (loss)                                               $  (254,279)                $ 1,894,334
                                                                ===========                 ===========

Limited partners' interest in net income (loss)                 $  (251,736)                $ 1,875,391
                                                                ===========                 ===========

Weighted average number of units outstanding used in
  computing basic net income (loss) per limited
  partnership unit                                                   21,566                      21,566
                                                                ===========                 ===========

Basic net income (loss) per
   limited partnership unit                                     $    (11.67)                $     86.96
                                                                ===========                 ===========


<FN>
                  The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

                                       5
<PAGE>




                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                             STATEMENT OF CASH FLOWS
                                   (Unaudited)

                                                                   For the Nine
                                                                   Months Ended
                                                                   September 30,
                                                                        2000
                                                                   -------------


Cash flows from operating activities:
  Cash distributions from Local Limited Partnerships                $   129,618
  Interest payments on Purchase Money Notes                            (123,760)
  Cash paid for general and administration expenses                     (47,567)
  Interest received                                                      13,899
                                                                    -----------
      Net cash used in operating activities                             (27,810)
                                                                    -----------

Cash flows from financing activity:
  Capital distributions                                                  (3,087)
                                                                    -----------
      Net cash used in financing activities                              (3,087)
                                                                    -----------

Cash flows from investing items:
  Cash proceeds from sale of investment in Osuna
   Apartments                                                           100,000
  Consulting fees                                                       (23,426)
  Deferred closing costs and reimbursable expenses                      (49,797)
  Estimated  state taxes paid from proceeds from sale of
     investments in Local Limited Partnerships                         (211,271)
                                                                    -----------
      Net cash used in  investing items                                (184,494)
                                                                    -----------

Net decrease in cash and cash equivalents                              (215,391)

Cash and cash equivalents at:

  Beginning of period                                                   526,940
                                                                    -----------

  End of period                                                     $   311,549
                                                                    ===========

                                  (continued)


                                      6

<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                       STATEMENT OF CASH FLOWS (continued)
                                   (Unaudited)

Reconciliation of net income to net cash provided by operating activities:


                                                                   For the Nine
                                                                   Months Ended
                                                                   September 30,
                                                                        2000
                                                                   -------------

Net income                                                          $ 1,894,334

Adjustments to reconcile net income to net cash
  provided by operating activities:

    Share of income of Local Limited
      Partnership investments                                          (109,599)

    Cash distributions from Local Limited
      Partnerships                                                      129,618

    Interest expense added to Purchase Money
      Notes, net of discount amortization                               440,482

    Gain on sale of investment in Local Limited
      Partnerships                                                   (2,432,299)

    (Decrease) increase in:
      Accrued interest payable                                           (3,280)
      Accounts payable to affiliates                                     73,499
      Accounts payable                                                   (1,565)
      Accrued expenses                                                  (19,000)
                                                                    -----------
Net cash used in operating activities                               $   (27,810)
                                                                    ===========



   The accompanying notes are an integral part of these financial statements.

                                       7

<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1. Organization and Liquidation of the Partnership

Organization

         Liberty Housing Partners Limited  Partnership (the  "Partnership")  was
formed under the Massachusetts Uniform Limited Partnership Act on March 20, 1984
for the primary purpose of investing in other limited partnerships which own and
operate government  assisted  multi-family  rental housing complexes (the "Local
Limited Partnerships").

Liquidation and Sale of Investments in Local Limited Partnerships

         On March 30, 2001,  the  Partnership  sold its 98% limited  partnership
interests in  Fuquay-Varina,  Oxford Homes and Williamston  Homes to the general
partner of these  partnerships or his affiliate for $148,485 plus the assumption
of the related  Purchase  Money Note  obligations.  The carrying  value of these
properties  had been  adjusted at December  31, 2000 to reflect the actual sales
transactions.

         On February 1, 2000, the Partnership sold its 98% interest as a limited
partner (the  "Partnership  Interest") in Osuna Apartments  Company ("Osuna") to
the Sovereign  Management  Corporation,  the company retained by Osuna to manage
its apartment  complex (the  "Purchaser").  In consideration for the sale of the
Partnership  Interest,  the  Partnership  received a net cash purchase  price of
$100,000.  In connection  with the sale, the holders of the Purchase Money Notes
(the "Notes")  issued by the  Partnership in connection  with its acquisition of
the  Partnership  Interest  released the  Partnership  from all  liabilities  in
connection  with  the  Notes.  After  transaction  expenses,   including  $1,800
recognized in the third quarter of 2000,  the  Partnership  recognized a gain of
$2,432,299 on the sale of the investment.

         On May 28, 1999,  the  Partnership  sold its interest in Fiddlers Creek
Apartments in exchange for $483,451 in cash and assumption of the Purchase Money
Note obligations.  On April 13, 2000, estimated state withholding taxes totaling
$211,271 were paid from the proceeds of the sale of the Partnership's investment
in Fiddlers Creek  Apartments.  The Partnership  subsequently  reevaluated  this
obligation  and applied for a refund of the $211, 271  previously  remitted.  On
November 7, 2000 the refund was received with interest of $4,659.

         On July 15,  1999,  the  Partnership  sold its  interest in Linden Park
Associates  Limited  Partnership  in exchange for $395,960 in cash.  Linden Park
Associates  refinanced  their  existing debt and also paid in full the principal
and accrued and unpaid  interest  due the  Partnership  on their notes  totaling
$241,058.  In  accordance  with the  Partnership's  agreement  with the  General
Partner of Linden  Park  Associates  (the  "Linden  GP"),  these funds have been
segregated  for use to pay the fees and expenses due the Linden GP in connection
with the  consulting  arrangement  described  below.  Interest  earned  on these
segregated funds will be available to pay these fees and expenses.


                                       8
<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1. Organization and Liquidation of the Partnership, continued

Liquidation and Sale of Investments in Local Limited Partnerships, continued

         The Linden GP was  engaged  in  September,  1998 to assist the  general
partner to review the Partnership's portfolio, develop a strategy for maximizing
the value of the portfolio and implementing the strategy. The agreement provides
for fees based on the successful  implementation  of all or part of the strategy
developed  which will be paid from the segregated  funds  discussed  above.  The
remaining  balance of the segregated funds was $58,696 as of September 30, 2001.
In the second quarter of 2001, consulting fees totaling $18,018 were paid to the
Linden GP in respect to Austintown Associates. In the first quarter of 2001, the
consulting fees paid to the Linden GP in respect of the successful  sales of the
Partnership's investments in Fuquary-Varina,  Oxford Homes and Williamston Homes
totaled  $71,723.  In 2000, the consulting fees paid to the Linden GP in respect
of the successful sale of the  Partnership's  investment in Osuna Apartments was
$23,426 and reimbursed expenses totaled $407.

         Management  entered into  negotiations  to sell the  Partnership's  94%
interests in Brierwood, Brierwood II, Pine Forest and Meadowwood Apartments. The
sale of the  Partnership's  interests in Brierwood,  Pine Forest and  Meadowwood
Apartments  requires  consent from all the related  Purchase Money Note holders.
Such consents were requested.  The Partnership  received  unanimous consent from
the Purchase Money Note holders  relating to Pine Forest  Apartments but did not
receive  unanimous  consent  from the Purchase  Money Note  holders  relating to
Brierwood and Meadowwood Apartments. Accordingly, the transactions could not all
be consummated as proposed.  Under the partnership  agreements relating to these
investments,  Liberty  LGP has the right to cause the sale of the  partnership's
project.  Liberty LGP has agreed to pursue the sale of these four  projects  and
has caused the respective Local Limited Partnerships to enter into contracts for
sale of the  projects.  The  proposed  purchasers  are  affiliates  of the local
general  partner in these  partnerships.  The Local  Limited  Partnership  would
receive  only  a  nominal  cash  payment  in  connection  with  each  sale.  The
transactions  are not expected to result in any  distribution  in respect of the
Partnership's  interest in these partnerships.  Management presently anticipates
the closing of these transactions by the end of 2001.

         The  Partnership  entered  into an  agreement  with the  local  general
partner  of  Austintown   Associates  to  sell  the  Partnership's  98%  limited
partnership interest, subject, among other things, to the consent of the related
Purchase Money Note holders.  The Partnership did not receive  unanimous consent
of the Purchase  Money Note holders and the agreement  expired on April 1, 2000.
On September  15, 2000 certain of the Purchase  Money Note holders  commenced an
action in the Court of Common Pleas Mahoning County,  Ohio seeking,  among other
things,  to  foreclose  upon  the  Partnership's   pledge  of  its  98%  limited
partnership interest in Austintown  Associates.  The Partnership did not contest
the proceeding  and, on February 26, 2001, the Court entered a default  judgment
and order appointing a receiver to sell the Partnership's interest in Austintown
Associates to satisfy the judgment. The sale proceeds,  after the costs of sale,
will be paid to the Purchase Money Note holders.

                                       9
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1. Organization and Liquidation of the Partnership, continued

Liquidation and Sale of Investments in Local Limited Partnerships, continued

         Management  commenced  discussions  with the  local  manager  for Surry
Manor,  Ltd. and Glendale Manor Apartments to either purchase the  Partnership's
interests in those  partnerships or sell the Partnership's  projects.  The local
manager is now in the process of obtaining market studies for these  properties.
No agreement on the transfer of these interests or the sale of these  properties
has been reached.  The sale of these interests requires unanimous consent of the
Purchase Money Note holders.  Under the partnership agreements relating to these
investments,  Liberty  LGP has the  right to cause  the sale of these  projects.
Management will continue to pursue both options in the fourth quarter of 2001.

         The  carrying   values  of  the   investments   in  the  Local  Limited
Partnerships  and the Purchase  Money Notes and related  accrued  interest  were
adjusted to their  estimated fair values and settlement  amounts,  respectively,
upon adopting the liquidation basis of accounting (See Note 2).

         As discussed  above,  the Partnership is currently in various stages of
negotiations  to  sell  its  interests  in the  remaining  seven  Local  Limited
Partnerships.  If the  Partnership  is  successful in disposing of its remaining
investments,   management   presently  intends  to  wind  up  the  Partnership's
operations in the fourth quarter of 2001 or the first quarter of 2002.

         No  assurance  can be  given  that  the  Partnership  will  be  able to
successfully  conclude  any  of  the  above  transactions.   Consequently,   the
completion of the liquidation of the Partnership may be different than currently
anticipated.

         The net amount, if any, ultimately  available for distribution from the
liquidation of the Partnership  depends on many unpredictable  factors,  such as
the amounts  realized on the sale of the remaining  investments in Local Limited
Partnerships,  carrying costs of the assets prior to sale,  settlement of claims
and  commitments,  the amount of revenue and expenses of the  Partnership  until
completely liquidated and other uncertainties.

2. Significant Accounting Policies

Basis of Presentation

        In the  opinion  of the  General  Partner,  the  accompanying  unaudited
financial  statements  contain all normal  recurring  adjustments  necessary  to
present  fairly the  financial  statements  of the  Partnership  for the periods
presented.  Changes of net assets in  liquidation  and operating  results of any
interim  period  are not  necessarily  indicative  of the  results  that  may be
expected for a full year. The financial statements do not

                                       10
<PAGE>



                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


2. Significant Accounting Policies, continued

Basis of Presentation, continued

include all of the information and footnote  disclosures  required by accounting
principles  generally accepted in the United States of America.  These financial
statements  should  be  read  in  conjunction  with  the  Partnership's  audited
financial  statements  and notes thereto  included in the  Partnership's  annual
report on Form 10-K for the year ended December 31, 2000.

Basis of Accounting

         Effective  December 31, 2000, the  Partnership  adopted the liquidation
basis of accounting.  Prior to that date, the  Partnership  recorded  results of
operations using the going concern basis of accounting.

         The accompanying  statements of net assets in liquidation and statement
of  changes  of net  assets in  liquidation,  reflect  the  transactions  of the
Partnership utilizing liquidation  accounting concepts as required by accounting
principles  generally  accepted  in the  United  States  of  America.  Under the
liquidation  basis of  accounting,  assets  are  stated at their  estimated  net
realizable  values  and  liabilities  are  stated at their  anticipated  payable
amounts.

         The valuation of assets and liabilities  necessarily requires estimates
and assumptions,  and there are uncertainties in carrying out the dissolution of
the  Partnership.  The  actual  values  upon  dissolution  and costs  associated
therewith could be higher or lower than the amounts recorded.

         The accompanying  statement of operations for the three months and nine
months ended September 30, 2000 reflects the operations of the Partnership prior
to the adoption of liquidation  basis of accounting and prior to the adjustments
required to adopt the liquidation basis of accounting.

Investment in Local Limited Partnerships

         Investments in Local Limited Partnerships at September 30, 2001 consist
of investments in seven Local Limited Partnerships which are stated at estimated
liquidation  value.  Prior  to  the  adoption  of  liquidation  accounting,  the
investments  in Local  Limited  Partnerships  were  accounted  for by the equity
method  whereby costs to acquire the  investments,  including  cash paid,  notes
issued  and  other  costs  of  acquisition,  were  capitalized  as  part  of the
investment account.  The Partnership's  equity in the earnings or losses of each
of the Local Limited  Partnerships  was reflected as an addition to or reduction
of the respective  investment account. The Partnership did not recognize losses,
which reduced its investment  account below zero.  Cash  distributions  received
which reduce the investment below zero were recognized as investment income.

                                       11
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

2. Significant Accounting Policies, continued

         Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the  financial  statements  and the reported  amounts of revenue and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

3. Contingencies

         The Purchase Money Notes relating to Austintown Associates,  Meadowwood
Ltd,  Brierwood  Ltd and Pine Forest  matured on October 30, 1999.  The Purchase
Money Notes  relating to Glendale Manor matured on August 29, 2000. The Purchase
Money Notes for Surry Manor matured on July 9, 2001.  These six series  Purchase
Money Notes were in default at September 30, 2001.

         The sale or other  disposition  by the  Partnership of its interests in
the Local Limited  Partnerships,  including in connection  with a foreclosure of
the pledged security for Purchase Money Note obligations, is likely to result in
recapture of previously claimed tax losses to the Partnership and may have other
adverse tax  consequences to the Partnership and to the Limited  Partners.  Such
recapture may cause some or all of the Limited  Partners to have taxable  income
from the Partnership  without cash distributions from the Partnership with which
to satisfy the tax liability resulting therefrom.

         As discussed in Note 1 above,  the  Partnership is currently in various
stages of  negotiations  to sell its  interests  in the  remaining  seven  Local
Limited  Partnerships.  If the  Partnership  is  successful  in disposing of its
remaining investments, management presently intends to wind up the Partnership's
operations in the fourth quarter of 2001 or the first quarter of 2002.

         No  assurance  can be  given  that  the  Partnership  will  be  able to
successfully  conclude  any  of  the  above  transactions.   Consequently,   the
completion of the liquidation of the Partnership may be different than currently
anticipated.

         As a result of its investments in the Local Limited  Partnerships,  the
Partnership is affected by certain risks and  uncertainties  associated with the
operations of the Properties owned by the Local Limited Partnerships.

                                       12
<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

3. Contingencies, continued

         The  rents of the  Properties,  many of which  receive  rental  subsidy
payments,  including  payments  under  Section 8 of Title II of the  Housing and
Community  Development  Act of 1974 ("Section 8"), are subject to specific laws,
regulations  and  agreements  with  federal  and  state  agencies.  The  subsidy
agreements  for Surry Manor and  Glendale  Manor  expire in April,  2002 and May
2002, respectively. The agreements for Austintown Associates expired in October,
2001 and the local manager is working with HUD for a one year  extension.  Under
the Multifamily  Assisted Housing and Reform and  Affordability  Act (MAHRAA) of
1997,  as  amended,   Congress  set  forth  the   legislation  for  a  permanent
"mark-to-market" program and provided for permanent authority for the renewal of
Section 8 Contracts.  Owners with Section 8 contracts  expiring after  September
30, 1998 are subject to the  provisions  of MAHRA.  On September  11, 1998,  HUD
issued an  interim  rule to  provide  clarification  for  implementation  of the
mark-to-market  program.  Since then, revised guidance has been provided through
various  HUD  housing   notices,   including   notice  99-36,   which  addresses
project-based  Section 8 contracts  expiring  in fiscal  year 2000.  In February
2001, HUD issued a new Section 8 Contract Renewal GuideBook,  which replaced HUD
notice 99-36.

         Under the GuideBook,  project owners have several options for Section 8
contract  renewals,  depending  on the type of project and rent  level.  Options
include  marking rents up to market,  renewing other  contracts with rents at or
below market, referring projects to the Office of Multifamily Housing Assistance
Restructuring  (OMHAR) for  mark-to-market  or "OMHAR lite"  renewals,  renewing
contracts  that are exempted  from  referral to OMHAR,  renewing  contracts  for
portfolio re-engineering demonstration and preservation projects, and opting out
of the Section 8 program.  Owners must submit  their  option to HUD at least 120
days before  expiration of their contract.  Each option contains  specific rules
and  procedures  that must be followed to comply  with the  requirements  of the
GuideBook.

         As such, each Local Limited Partnership may choose to either opt out of
the Section 8 program, request mortgage restructuring and renewal of the Section
8  contract,  or request  renewal of the  Section 8  contract  without  mortgage
restructuring.  Each option contains a specific set of rules and procedures that
must be  followed  in order to  comply  with the  requirements  of  MAHRAA.  The
properties  are working with HUD to renew their  existing  contracts  for two to
five year periods.

         The Partnership cannot reasonably predict  legislative  initiatives and
governmental  budget  negotiations,  the  outcome  of which  could  result  in a
reduction  in funds  available  for the various  federal and state  administered
housing programs  including the Section 8 program.  Such changes could adversely
affect the future net  operating  income  and debt  structure  of certain  Local
Limited Partnerships currently receiving such subsidy or similar subsidies.

                                       13
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

4. Investments in Local Limited Partnerships

         The  Partnership  acquired  Local  Limited  Partnership   interests  in
thirteen Local Limited  Partnerships which own and operate  government  assisted
multi-family  housing  complexes.  As discussed in Note 1 above, the Partnership
has sold six of its  investments as of September 30, 2001. The  Partnership,  as
Investor  Limited  Partner  pursuant to Local  Limited  Partnership  Agreements,
acquired  interests  ranging  from  94%  to 98% in the  profit  or  losses  from
operations and cash from operations of each of the Local Limited Partnerships.

         As  discussed  above,  the  Partnership  is currently in the process of
liquidating the  Partnership  and disposing of its remaining  investments in the
Local  Limited  Partnerships  presently  estimated  to occur  through the fourth
quarter  of 2001 or  first  quarter  of 2002.  No  assurance  can be given  that
management will be able to complete its liquidation of Partnership's investments
within this time period.

         The following is a summary of cumulative  activity for  investments  in
Local Limited Partnerships since their dates of acquisition:
<TABLE>
<CAPTION>

                                                                          (Unaudited)               (Audited)
                                                                         September 30,             December 31,
                                                                              2001                    2000
                                                                        ---------------           --------------

<S>                                                                       <C>                      <C>
Total acquisition cost to the Partnership                                  $ 9,356,379              $ 9,356,379

Additional capital contributed by the Partnership                               11,425                   11,425

Partnership's share of losses of Local Limited Partnerships                 (3,289,654)              (3,444,200)

Cash distributions received from Local Limited Partnerships                 (4,199,256)              (4,199,256)

Cash distributions received from Local  Limited
     Partnerships recognized as Investment Income                               95,195                   95,195

Sales of investments in Local Limited Partnerships                          (1,512,144)              (1,035,518)
Adjustment to reduce investments in Local Limited Partnerships
     to liquidation accounting basis                                          (352,549)                (487,115)
                                                                           -----------              -----------

Investments in Local Limited Partnerships                                  $   109,396              $   296,910
                                                                           ===========              ===========
</TABLE>

                                       14

<PAGE>



                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


4. Investments in Local Limited Partnerships, continued

         Summarized financial information from the combined financial statements
of the ten Local Limited  Partnerships in which the Partnership held investments
during  the three  and nine  months  ended  September  30,  2001 and 2000 are as
follows:
<TABLE>
<CAPTION>
                               Summarized Statement of Operations (Unaudited)


                                             For the Three Months Ended          For the Nine Months Ended
                                                    September 30,                       September 30,
                                           ----------------------------         ---------------------------
                                               2001            2000                  2001          2000
                                           ------------   ------------          ------------   ------------

<S>                                       <C>            <C>                   <C>            <C>
Rental and other income                    $   621,347    $   790,367           $ 2,076,276    $ 2,409,534
Expenses:
  Operating expenses                           422,617        542,891             1,332,435      1,521,499
  Interest expense                             108,672        143,579               360,923        432,016
  Depreciation and amortization                111,556        145,076               367,861        439,605
                                           -----------    -----------           -----------    -----------
    Total expenses                             642,845        831,546             2,061,219      2,393,120
                                           -----------    -----------           -----------    -----------

Net income (loss)                          $   (21,498)   $   (41,179)          $    15,057    $    16,414
                                           -----------    -----------           -----------    -----------

Partnership's share of net income (loss)   $   (19,510)       (40,067)          $    17,728    $    18,888
                                           -----------    -----------           -----------    -----------

Other partners' share
  of net income (loss)                     $    (1,988)   $    (1,112)          $    (2,671)   $    (2,474)
                                           -----------    -----------           -----------    -----------

</TABLE>

                                       15
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                      (A Massachusetts Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

4.  Investments in Local Limited Partnerships, continued

         The  difference  between  the  Partnership's  share of  income in Local
Limited Partnership investments in the Partnership's Statement of Operations for
the three months ended and nine months ended September 30, 2000 and the share of
loss  in  the  above  Summarized   Statement  of  Operations   consists  of  the
Partnership's  unrecorded  share of losses and cash  distributions  recorded  as
investment income as follows:
<TABLE>
<CAPTION>
                                                                           For the Three             For the Nine
                                                                            Months ended             Months Ended
                                                                           September 30,             September 30,
                                                                               2000                       2000
                                                                          --------------            --------------
<S>                                                                         <C>                        <C>
Share of income (loss) in Local Limited Partnership Investments
  in the Partnership's Statement of Operations                               $(12,011)                  $109,599

Partnership's share of income (loss) in the
  above summarized Statement of Operations                                   $(40,067)                    18,888
                                                                             --------                   --------

    Difference                                                               $ 28,056                   $ 90,711
                                                                             ========                   ========

Unrecorded Losses:
    Brierwood, Ltd.                                                             1,491                      8,133
    Brierwood II, Ltd.                                                          4,344                     18,087
    Pine Forest Apartments, Ltd.                                               14,461                     32,254
    Surry Manor                                                                 8,646                     17,011
    Glendale Manor                                                               (498)                     6,092
    Meadowwood                                                                   (388)                     7,206
                                                                             --------                   --------
     Subtotal Unrecorded Losses                                                28,056                     88,783
Cash distributions recorded as investment income:
      Glendale Manor                                                             --                        1,928
                                                                             --------                   --------
Total                                                                        $ 28,056                   $ 90,711
                                                                             ========                   ========

</TABLE>

                                       16

<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (Unaudited)


5. Transactions with Affiliates

         In  the  first  nine  months  of  2000,  the   Partnership   recognized
administrative expenses and management fees owed to the Managing General Partner
of $36,000 and $37,500,  respectively. In the third quarter of 2000, $12,000 and
$12,500, respectively of these fees were recognized.

         In connection with the adoption of the liquidation basis of accounting,
an  adjustment  to record  estimated  liabilities  through  the  liquidation  of
$100,000  was recorded at December 31,  2000.  This amount  included  $50,000 of
partnership management fees and $50,000 of reimbursable administration expenses.
At  September  30,  2001,  accounts  payable  to  affiliates  totaling  $384,271
represents  amounts  owed  for  reimbursements  of  Partnership   administrative
expenses and management fees of $180,000 and $179,771,  respectively and amounts
estimated  through the  liquidation for  administrative  expenses and management
fees of $12,000  and  $12,500,  respectively.  In the first nine months of 2001,
there were no management fees to the General  Partner  recognized in addition to
the estimate  through  liquidation  recorded at December 31, 2000 and  estimated
administrative expenses through liquidation were reduced by $2,000.

6. Statement of Distributable Cash from Operations

         Distributable  Cash From Operations for the nine months ended September
30, 2001, as defined in Section 17 of the Partnership Agreement, is as follows:

Interest income                                                       $  14,174

Less: General and administrative expenses                              (113,555)
                                                                      ---------

Cash from Operations, as defined                                        (99,381)
                                                                      ---------

Distributable Cash from Operations, as defined                        $       0
                                                                      =========

                                       17
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

General

         Because of the progress  which had been made during 2000 in  connection
with the  Partnership's  efforts to liquidate  its portfolio of  investments  in
Local Limited Partnerships, effective December 31, 2000, the Partnership adopted
the  liquidation  basis of  accounting.  Prior  to that  date,  the  Partnership
recorded results of operations using the going concern basis of accounting.

         Under the liquidation  basis of accounting,  assets are stated at their
estimated net realizable  values and liabilities are stated at their anticipated
settlement amounts. The valuation of assets and liabilities necessarily requires
many  estimates and  assumptions,  and there are  substantial  uncertainties  in
carrying out the liquidation of the Partnership's assets. The actual values upon
liquidation  and costs  associated  therewith  could be higher or lower than the
amounts  recorded.  In connection  with the  liquidation,  the  Partnership  has
recorded an accrual for additional  expenses to reflect the  Partnership's  best
estimate of the costs associated with the liquidation.

Liquidity and Capital Resources

The Partnership

         The  Partnership  is liable for the amount of the Purchase  Money Notes
delivered  to purchase  its  interests  in the Local  Limited  Partnerships  (as
hereinafter described),  and for the Partnership's day-to-day administrative and
operating expenses.

         The   Partnership   acquired  its   interests  in  two  Local   Limited
Partnerships  for cash. The  Partnership  acquired its interests in eleven other
Local Limited Partnerships by delivery of cash, short-term promissory notes (all
of which have been paid in full) and purchase money  promissory notes which bear
interest at the rate of 9% per annum (the "Purchase  Money Notes").  The payment
of each Purchase Money Note is secured by a pledge of the Partnership's interest
in the Local Limited  Partnership  to which the note  relates.  Recourse on each
Purchase Money Note is limited to the pledged  partnership  interest.  Each note
had an initial  term of 15 to 17 years.  The  Partnership's  interests  in these
Local  Limited  Partnerships  were  pledged as  security  for the  Partnership's
obligations under the respective Purchase Money Notes.

         In May 1999,  the  Partnership  sold its  interest  in  Fiddlers  Creek
Apartments and the purchaser  assumed the  Partnership's  obligations  under the
related Purchase Money Notes. In July 1999, the Partnership sold its interest in
Linden Park  Associates.  Linden Park Associates  refinanced their existing debt
and also paid in full the  principal  and  accrued and unpaid  interest  due the
Partnership on their notes. In February 2000, the Partnership  sold its interest
in Osuna Apartments Company and the holders of the Purchase Money Notes released
the Partnership  from all liabilities in connection with the Notes. On March 30,
2001,  the  Partnership  sold its  interest in  Fuquay-Varina,  Oxford Homes and
Williamston  Homes and the purchaser  assumed the Partnership  obligations under
the related Purchase Money Notes.

                                       18
<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

The Partnership, continued

         At September 30, 2001, six series of the Purchase Money Notes, relating
to  Austintown   Associates,   Meadowwood  Ltd.,   Brierwood  Ltd,  Pine  Forest
Apartments,  Ltd.,  Glendale Manor Apartments and Surry Manor,  Ltd. had matured
and  were  in  default.   None  of  the  series  of  Purchase   Money  Notes  is
cross-defaulted  to the  others,  nor are the  series of  Purchase  Money  Notes
cross-collateralized in any manner.

         The terms of each Purchase Money Note permit  interest to accrue to the
extent cash  distributions  to the Partnership from the applicable Local Limited
Partnership are insufficient to enable the Partnership to pay the Purchase Money
Note on a current basis.  Generally,  the amount of such cash distributions have
not been  sufficient in any year to pay the full amount of interest  accrued for
that year on the Purchase  Money Notes.  The Purchase Money Notes do not require
payment of any  portion of the  principal  amount of the note prior to  maturity
(except that the Purchase  Money Notes  require  immediate  payment  following a
default (as defined therein) by the Partnership thereunder).  Accordingly,  each
Purchase  Money Note  requires a  substantial  balloon  payment at maturity.  In
connection with the adoption of the liquidation  basis of accounting,  the value
shown for the Purchase  Money Notes was adjusted to the  anticipated  settlement
amount and no further interest accruals will be recorded.

         The sale or other  disposition  by the  Partnership of its interests in
the Local Limited  Partnerships,  including in connection  with a foreclosure of
the pledged security, is likely to result in recapture of previously claimed tax
losses to the  Partnership  and may have other adverse tax  consequences  to the
Partnership and to the Unit holders. Such recapture may cause some or all of the
Unit  holders  to  have  taxable  income  from  the  Partnership   without  cash
distributions  from the  Partnership  with  which to satisfy  the tax  liability
resulting therefrom.

         On March 30, 2001,  the  Partnership  sold its 98% limited  partnership
interests in  Fuquay-Varina,  Oxford Homes and Williamston  Homes to the general
partner of these  partnerships or his affiliate for $148,485 plus the assumption
of the related  Purchase  Money Note  obligations.  The carrying  value of these
properties  had been  adjusted at December  31, 2000 to reflect the actual sales
transactions.

         On February 1, 2000, the Partnership sold its 98% interest as a limited
partner (the  "Partnership  Interest") in Osuna Apartments  Company ("Osuna") to
the Sovereign  Management  Corporation,  the company retained by Osuna to manage
its apartment  complex (the  "Purchaser").  In consideration for the sale of the
Partnership  Interest,  the  Partnership  received a net cash purchase  price of
$100,000.  In connection  with the sale, the holders of the Purchase Money Notes
(the "Notes")  issued by the  Partnership in connection  with its acquisition of
the  Partnership  Interest  released the  Partnership  from all  liabilities  in
connection  with  the  Notes.  After  transaction  expenses,   including  $1,800
recognized in the third quarter of 2000,  the  Partnership  recognized a gain of
$2,432,299 on the sale of the investment.

                                       19
<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

The Partnership, continued

         On May 28, 1999,  the  Partnership  sold its interest in Fiddlers Creek
Apartments in exchange for $483,451 in cash and assumption of the Purchase Money
Note obligations.  On April 13, 2000, estimated state withholding taxes totaling
$211,271 were paid from the proceeds of the sale of the Partnership's investment
in Fiddlers Creek  Apartments.  The Partnership  subsequently  reevaluated  this
obligation  and applied for a refund of the $211, 271  previously  remitted.  On
November 7, 2000 the refund was received with interest of $4,659.

         On July 15,  1999,  the  Partnership  sold its  interest in Linden Park
Associates  Limited  Partnership  in exchange for $395,960 in cash.  Linden Park
Associates  refinanced  their  existing debt and also paid in full the principal
and accrued and unpaid  interest  due the  Partnership  on their notes  totaling
$241,058.  In  accordance  with the  Partnership's  agreement  with the  General
Partner of Linden  Park  Associates  (the  "Linden  GP"),  these funds have been
segregated  for use to pay the fees and expenses due the Linden GP in connection
with the  consulting  arrangement  described  below.  Interest  earned  on these
segregated funds will be available to pay these fees and expenses.

         Management  entered into  negotiations  to sell the  Partnership's  94%
interests in Brierwood, Brierwood II, Pine Forest and Meadowwood Apartments. The
sale of the  Partnership's  interests in Brierwood,  Pine Forest and  Meadowwood
Apartments  requires  consent from all the related  Purchase Money Note holders.
Such consents were requested.  The Partnership  received  unanimous consent from
the Purchase Money Note holders  relating to Pine Forest  Apartments but did not
receive  unanimous  consent  from the Purchase  Money Note  holders  relating to
Brierwood and Meadowwood Apartments.  Accordingly, the transactions could not be
consummated  as proposed.  Under the  partnership  agreements  relating to these
investments,  Liberty  LGP has the right to cause the sale of the  partnership's
project.  Liberty LGP has agreed to pursue the sale of these four  projects  and
has caused the respective Local Limited Partnerships to enter into contracts for
sale of the  projects.  The  proposed  purchasers  are  affiliates  of the local
general  partner in these  partnerships.  The Local  Limited  Partnership  would
receive  only  a  nominal  cash  payment  in  connection  with  each  sale.  The
transactions  are not expected to result in any  distribution  in respect of the
Partnership's  interest in these partnerships.  Management presently anticipates
the closing of these transactions by the end of 2001.

         The  Partnership  entered  into an  agreement  with the  local  general
partner  of  Austintown   Associates  to  sell  the  Partnership's  98%  limited
partnership interest, subject, among other things, to the consent of the related
Purchase Money Note holders.  The Partnership did not receive  unanimous consent
of the Purchase  Money Note holders and the agreement  expired on April 1, 2000.
On September  15, 2000 certain of the Purchase  Money Note holders  commenced an
action in the Court of Common Pleas Mahoning County,  Ohio seeking,  among other
things,  to  foreclose  upon  the  Partnership's   pledge  of  its  98%  limited
partnership interest in Austintown  Associates.  The Partnership did not contest
the proceeding and, on February 26, 2001, the Court

                                       20
<PAGE>



                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

The Partnership, continued

entered  a  default  judgment  and  order  appointing  a  receiver  to sell  the
Partnership's  interest in Austintown  Associates  to satisfy the judgment.  The
sale proceeds,  after the costs of sale, will be paid to the Purchase Money Note
holders

         Management  commenced  discussions  with the  local  manager  for Surry
Manor,  Ltd. and Glendale Manor Apartments to either purchase the  Partnership's
interests in those  partnerships or sell the Partnership's  projects.  The local
manager is now in the process of obtaining  market  studies and  appraisals  for
these properties. No agreement on the transfer of these interests or the sale of
these  properties  has  been  reached.  The  sale of  these  interests  requires
unanimous  consent of the Purchase  Money Note  holders.  Under the  partnership
agreements relating to these investments, Liberty LGP has the right to cause the
sale of these  projects.  Management will continue to pursue both options in the
fourth quarter of 2001.

         As discussed  above,  the Partnership is currently in various stages of
negotiations  to  sell  its  interests  in the  remaining  seven  Local  Limited
Partnerships.  If the  Partnership  is  successful in disposing of its remaining
investments,   management   presently  intends  to  wind  up  the  Partnership's
operations in the fourth quarter of 2001 or the first quarter of 2002.

         No  assurance  can be  given  that  the  Partnership  will  be  able to
successfully  conclude  any  of  the  above  transactions.   Consequently,   the
completion of the liquidation of the Partnership may be different than currently
anticipated.

         The net amount, if any, ultimately  available for distribution from the
liquidation of the Partnership  depends on many unpredictable  factors,  such as
the amounts  realized on the sale of the remaining  investments in Local Limited
Partnerships,  carrying costs of the assets prior to sale,  settlement of claims
and  commitments,  the amount of revenue and expenses of the  Partnership  until
completely liquidated and other uncertainties.

         In light of the  Partnership's  adoption  of the  liquidation  basis of
accounting,  the  Partnership's  net asset values as of  September  30, 2001 and
December 31, 2000 reflect the net realizable values for the Investments in Local
Limited  Partnerships  after giving effect to the  estimated  closing costs upon
sale or disposal of the  investments.  In addition,  an estimated  liability was
recorded for  estimates of costs to be incurred in carrying out the  dissolution
and liquidation of the  Partnership.  These costs include  estimated legal fees,
accounting fees, tax return preparation and partnership  administration.  Actual
costs could vary  significantly  from these estimated costs due to uncertainties
related  to the  length  of  time  required  to  complete  the  liquidation  and
dissolution  of the  Partnership  and  unanticipated  events  which may arise in
disposing of the Partnership's remaining assets.

                                       21
<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

The Partnership, continued

         At  September  30,  2001,  the  Partnership  had  total  cash  and cash
equivalents of $507,939, including cash reserves of $449,243 and restricted cash
of $58,696 as compared to total cash at December 31, 2000 of $523,389, including
cash  reserves  of $376,286  and  restricted  cash of  $147,103.  Cash  reserves
increased  primarily  as the result of  $148,485  proceeds  from the sale of the
Partnership's  interests in Fuquay-Varina,  Oxford Homes and Williamston  Homes.
Restricted  cash decreased as a result of costs paid relating to the sale of the
Partnership's investments.

         Accounts payable and accrued expenses  decreased to a total of $216,669
at  September  30, 2001 from  $378,846 at December  31,  2000.  The decrease was
primarily the result of payment of  consulting  fees relating to the sale of the
Partnership's  investments of $89,741,  legal and accounting fees of $58,174 and
other operating costs of $14,262.

The Local Limited Partnerships.

         The  liquidity  of  the  Local  Limited   Partnerships   in  which  the
Partnership  has invested is dependent  on the ability of the  respective  Local
Limited  Partnerships,  which own and operate government  assisted  multi-family
rental housing  complexes,  to generate cash flow  sufficient to fund operations
and debt service and to maintain  working  capital  reserves.  Each of the Local
Limited  Partnerships is regulated by government  agencies which require monthly
funding  of  certain  operating  and  capital  improvements  reserves  and which
regulate  the amount of cash to be  distributed  to owners.  Each Local  Limited
Partnership's  source  of funds is  rental  income  received  from  tenants  and
government  subsidies.  Certain of the Local Limited Partnerships receive rental
income  pursuant  to  Section 8 rental  assistance  contracts.  Surry  Manor and
Glendale  Manor's  contracts  expire in April  2002 and May 2002,  respectively.
Austintown  Associates'  contract  expires in October 2001. The local manager is
working  with HUD to extend this  agreement  for a year.  Under the  Multifamily
Assisted Housing and Reform and  Affordability Act (MAHRAA) of 1997, as amended,
Congress set forth the legislation for a permanent  "mark-to-market" program and
provided for permanent authority for the renewal of Section 8 Contracts.  Owners
with Section 8 contracts  expiring  after  September 30, 1998 are subject to the
provisions  of MAHRAA.  On  September  11,  1998,  HUD issued an interim rule to
provide clarification of the implementation of the mark-to-market program. Since
then,  revised  guidance has been provided  through various HUD housing notices,
including  notice  99-36,  which  addresses  project-based  Section 8  contracts
expiring  in fiscal  year 2000.  In  February  2001,  HUD issued a new Section 8
Contract Renewal GuideBook, which replaced HUD notice 99-36.

         Under the GuideBook,  project owners have several options for Section 8
contract  renewals,  depending  on the type of project and rent  level.  Options
include  marking rents up to market,  renewing other  contracts with rents at or
below market, referring projects to the Office of Multifamily Housing Assistance
Restructuring

                                       22

<PAGE>

                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

The Local Limited Partnerships, continued

(OMHAR) for mark-to-market or "OMHAR lite" renewals, renewing contracts that are
exempted from referral to OMHAR, renewing contracts for portfolio re-engineering
demonstration  and  preservation  projects,  and  opting  out of the  Section  8
program.  Owners  must  submit  their  option  to HUD at least  120 days  before
expiration of their contract. Each option contains specific rules and procedures
that must be followed to comply with the requirements of the GuideBook.

         As such, each Local Limited Partnership may choose to either opt out of
the Section 8 program, request mortgage restructuring and renewal of the Section
8  contract,  or request  renewal of the  Section 8  contract  without  mortgage
restructuring.  Each option contains a specific set of rules and procedures that
must be  followed  in order to  comply  with the  requirements  of  MAHRAA.  The
properties  are working with HUD to renew their  existing  contracts  for two to
five year periods.

         The Partnership cannot reasonably predict  legislative  initiatives and
governmental  budget  negotiations,  the  outcome  of which  could  result  in a
reduction  in funds  available  for the various  federal and state  administered
housing programs  including the Section 8 program.  Such changes could adversely
affect the future net  operating  income  and debt  structure  of certain  Local
Limited Partnerships currently receiving such subsidy or similar subsidies.

         The Local  Limited  Partnerships  are  impacted by inflation in several
ways.  Inflation  allows for increases in rental rates generally  reflecting the
impact of higher  operating and  replacement  costs.  Inflation also affects the
Local  Limited  Partnerships  adversely by  increasing  operating  costs such as
utilities and salaries.

         As discussed  above,  the Partnership is currently in various stages of
negotiations  to  sell  its  interests  in the  remaining  seven  local  limited
partnerships.  If the  Partnership  is  successful in disposing of its remaining
seven  investments,  management  presently  intends to wind up the Partnership's
operations in the fourth quarter of 2001 or the first quarter of 2002.

         Each  of  the  Local  Limited   Partnerships   has  incurred   mortgage
indebtedness. The mortgage loans provide for equal monthly payments of principal
and interest in amounts,  which will reduce the principal amount of the loans to
zero at maturity.  Each of the  maturity  dates of the  respective  mortgages is
substantially beyond the due date of the Purchase Money Note obligations.

         Upon a sale of a property by a Local Limited  Partnership  the mortgage
indebtedness  of such property must be satisfied  prior to  distribution  of any
funds to the partners in the Local Limited Partnership.

                                       23
<PAGE>


                  LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
                          (A Massachusetts Partnership)

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

Liquidity and Capital Resources, continued

Partnership Operations

         Because the Partnership  adopted the liquidation basis of accounting on
December 31, 2000,  the results of operations for the three month and nine month
periods ended September 30, 2001 are not presented.  Instead,  the Partnership's
operating  results have been reflected on the statement of changes of net assets
in liquidation and reflect  changes from the estimated net realizable  values of
assets and anticipated payable amounts of liabilities previously recorded.

         In the three months ended September 30, 2001, interest income earned on
cash  reserves  increased  to  $4,297  from  $3,733 in the  three  months  ended
September 30, 2000. For the first nine months of 2001, interest income increased
slightly to $14,174 from $13,899 in the first nine months of 2000.  In the three
months ended September 30, 2001, the Partnership incurred additional expenses of
$1,674  versus  $42,511  in the  three  months  ended  September  30,  2000  and
additional  expenses of $11,160 in the first nine months of 2001 versus $100,501
in the first  nine  months of 2000.  The  Partnership  has not  booked  interest
expense on the remaining  Purchase Money Notes in the first nine months of 2001,
although the associated legal liability has increased.  For the three months and
nine months ended  September 30, 2000, the Partnership  incurred  purchase money
note  interest  of  $201,690  and  $560,962.  Under  the  liquidation  basis  of
accounting,  the carrying value of the Purchase Money Notes and accrued interest
has been written down to the anticipated payable amounts. On March 30, 2001, the
Partnership  sold its interest in  Fuquay-Varina,  Oxford Homes and  Williamston
Homes. These sales transactions did not vary materially from previously recorded
amounts. The Partnership's equity in income (loss) for the three months and nine
months ended September 30, 2000 was $(12,011) and $109,599 respectively.



                                       24
<PAGE>



                                     PART II
                                Other Information

Item 3.  Defaults Upon Senior Securities.

         The Purchase Money Notes relating to Austintown Associates, Meadowwood
Ltd,  Brierwood  Ltd and Pine Forest  matured on October 30, 1999.  The Purchase
Money Notes  relating to Glendale Manor matured on August 29, 2000. The Purchase
Money Notes  relating to Surry Manor,  Ltd.  matured on July 9, 2001.  These six
series of Purchase  Money Notes are now in default.  The amounts due at maturity
under these  non-recourse  obligations  consisted  of  $3,640,000  in  aggregate
principal amount and $4,253,892 in accrued and unpaid  interest.  As of November
1, 2001, the aggregate arrearages under these notes amounted to $8,455,902.





                                       25


<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.


                                   LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP

                                    By:    TNG Properties Inc.
                                           Managing General Partner



                                    By:    /s/ Michael A. Stoller
                                           Michael A. Stoller
                                           President and CEO


                                    By:    TNG Properties Inc.
                                           Managing General Partner



                                    By:    /s/ Wilma R. Brooks
                                           Wilma R. Brooks
                                           Chief Financial Officer


Date: November 13, 2001



                                       26