FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                        QUARTERLY OR TRANSITIONAL REPORT



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

                                  FORM 10-QSB

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

               For the quarterly period ended September 30, 1999


[ ]  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 0-14457


                  NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A MARYLAND LIMITED PARTNERSHIP)
       (Exact name of small business issuer as specified in its charter)




          Maryland                                           52-1394972
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)

                       9200 KEYSTONE CROSSING, SUITE 500
                        INDIANAPOLIS, INDIANA 46240-7602
                    (Address of principal executive offices)

                                 (317) 817-7500
                          (Issuer's telephone number)


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

                         PART I - FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

a)

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

                        Statement of Financial Position
                                  (Unaudited)

                               September 30, 1999


ASSETS
Cash and cash equivalents                                   $  540,567
Investments in and advances to Local Limited
Partnerships (Note 2)                                               --
                                                            $  540,567

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Administrative and reporting fee payable to
General Partner (Note 3)                                    $  150,934
Accrued expenses                                                30,350
                                                               181,284

Partners' equity (deficit)
General Partner -- The National Housing
Partnership (NHP)                                             (91,657)
Original Limited Partner -- 1133 Fifteenth
Street Two Associates                                         (96,557)
Other Limited Partners -- 11,500 investment
units                                                          547,497
                                                               359,283
                                                            $  540,567


                 See Accompanying Notes to Financial Statements

b)


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

                            Statements of Operations
                                  (Unaudited)



                                    Three Months Ended       Nine Months Ended
                                       September 30,           September 30,
                                     1999        1998        1999        1998
REVENUES:
Interest income                    $  6,597    $  4,292    $ 18,779    $ 16,183

COSTS AND EXPENSES:
Administrative and reporting fees
to General Partner                   21,416      21,562      64,686      64,686
Other operating expenses             19,170      24,154      49,681      50,953
                                     40,586      45,716     114,367     115,639

NET LOSS                           $(33,989)   $(41,424)   $(95,588)   $(99,456)

NET LOSS ASSIGNABLE TO LIMITED
PARTNERS                           $(33,309)   $(40,594)   $(93,676)   $(97,466)

NET INCOME (LOSS) PER LIMITED
PARTNERSHIP INTEREST               $     (3)   $     (4)   $     (8)   $     (8)


                 See Accompanying Notes to Financial Statements

c)

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

                    Statement of Partner's Equity (Deficit)
                                  (Unaudited)



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

Equity (deficit) at January
1, 1999                        $ (90,701)   $ (95,601)   $ 641,173    $ 454,871

Net loss for the nine months
ended September 30, 1999            (956)        (956)     (93,676)     (95,588)

Equity (deficit) at September  $ (91,657)   $ (96,557)   $ 547,497    $ 359,283
30, 1999

Percentage interest at
September 30, 1999                    1%           1%           98%        100%
                                     (A)          (B)           (C)

(A)General Partner
(B)Original Limited Partner
(C)Consists of 11,500 investment units


                 See Accompanying Notes to Financial Statements

d)

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

                            Statements of Cash Flow
                                  (Unaudited)


                                                             Nine Months Ended
                                                                September 30,
                                                             1999         1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Distributions from local limited partnerships              $     --    $ 13,908
Interest received                                            18,799      16,183
Operating expenses paid                                     (73,067)    (59,288)
Net cash used in operating activities                       (54,268)    (29,197)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD              594,835     538,513

CASH AND CASH EQUIVALENTS, END OF PERIOD                   $540,567    $509,316

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
ACTIVITIES:
Net loss                                                   $(95,588)   $(99,456)
Adjustments to reconcile net loss to net cash used in
operating activities:
Distributions from local limited partnerships                    --      13,908
Increase in administrative and reporting fees
payable                                                      64,686      64,686
Decrease in accrued expenses                                (23,366)     (8,335)

Total adjustments                                            41,320      70,259

Net cash used in operating activities                      $(54,268)   $(29,197)



                 See Accompanying Notes to Financial Statements

e)

                  NATIONAL HOUSING PARTNERSHIP REALTY FUND III

                         Notes to Financial Statements
                                  (Unaudited)


(1)  ACCOUNTING POLICIES

ORGANIZATION

National Housing Partnership Realty Fund III (the "Partnership" or the
"Registrant") is a limited partnership organized under the Maryland Revised
Uniform Limited Partnership Act on May 10, 1985.  The Partnership was formed for
the purpose of raising capital by offering and selling limited partnership
interests and then investing in Local Limited Partnerships, each of which either
owns and operates an existing rental housing project or has acquired limited
partnership interests in partnerships which own and operate one or two existing
rental housing projects.  All such rental housing projects are financed and/or
operated with one or more forms of rental assistance or financial assistance
from the U.S. Department of Housing and Urban Development ("HUD").  On June 30,
1985, the Partnership began raising capital and acquiring interests in Local
Limited Partnerships.

The General Partner was authorized to raise capital for the Partnership by
offering and selling to additional limited partners not more than 11,500
interest at a price of $1,000 per interest. During 1985, the sale of interests
was terminated after the sale of 11,500 interests.

The National Housing Partnership, a District of Columbia limited partnership
("NHP" or the "General Partner") is the General Partner of the Partnership.

BASIS OF PRESENTATION

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

While the General Partner believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in the Partnership's Annual Report filed on Form 10-K for the year
ended December 31, 1998.

(2)  INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

The Partnership owns a 94.5% limited partnership interest (98% with respect to
the allocation of losses) in eight Local Limited Partnerships: Edmond Estates
Limited Partnership, Galion Limited Partnership, Indian Valley I Limited
Partnership, Indian Valley II Limited Partnership, Indian Valley III Limited
Partnership, Kimberly Associates Limited Partnership, Newton Hill Limited
Partnership, and Woodmark Limited Partnership.  The Partnership also acquired a
99% interest in Meadowwood Townhouses III Limited Partnership which owns a 99%
limited partnership interest in an operating limited partnership which holds
title to one rental housing property.  The Partnership's effective interest in
these operating limited partnerships is 98.01%.  Until August 16, 1999, the
Partnership also held a 99% limited partnership interest in Brunswick Village
Limited Partnership.

Brunswick Village Limited Partnership's note payable, plus accrued interest,
became due on February 28, 1999.  The Local Limited Partnership did not have the
resources to pay amounts due on the note payable.  On August 16, 1999, the note
holder foreclosed on the Partnership's interest on the Brunswick Village Limited
Partnership which secured the Note.  No gain or loss was recorded as a result of
this transfer of partnership interest.  With the loss of the Partnership's
interest to the note holder, the Partnership will not receive any future
benefits from this Local Limited Partnership and taxable income will be
generated and flow to the Partnership's investors without any distributable cash
for the current year.  The specific impact of the tax consequences is dependent
upon each specific partner's individual tax situation.

Because the Partnership, as a limited partner, does not exercise control over
the activities of the Local Limited Partnerships in accordance with the
partnership agreements, these investments in Local Limited Partnerships are
accounted for using the equity method.  Thus, the investments (and the advances
made to the Local Limited Partnerships as discussed below) are carried at cost
plus the Partnership's share of the Local Limited Partnerships' profits less the
Partnership's share of the Local Limited Partnerships' losses and distributions.
However, because the Partnership is not legally liable for the obligations of
the Local Limited Partnerships, and is not otherwise committed to provide
additional support to them, it does not recognize losses once its investments,
reduced for its share of losses and cash distributions, reach zero in each of
the individual Local Limited Partnerships.  As of December 31, 1996, investments
in all of its current Local Limited Partnerships had been reduced to zero.  The
Partnership did not recognize $503,913 and $691,089 of losses from its Local
Limited Partnerships during the nine months ended September 30, 1999 and 1998.
As of September 30, 1999, the Partnership has not recognized a total of
$16,286,811 of its allocated share of cumulative losses from the Local Limited
Partnerships in which its investment is zero.

Advances made by the Partnership to the individual Local Limited Partnerships
are considered part of the partnership's investment in Local Limited
Partnerships.  When advances are made, they are charged to operations as a loss
on investment in the Local Limited Partnership using previously unrecognized
cumulative losses.  As discussed above, due to the cumulative losses incurred by
the Local Limited Partnerships, the aggregate balance of investments in and
advances to the remaining nine Local Limited Partnerships has been reduced to
zero at September 30, 1999.  To the extent these advances are repaid by the
Local Limited Partnerships in the future, the repayments will be credited as
distributions and repayments received in excess of investment in Local Limited
Partnerships.  These advances are carried as a payable to the Partnership by the
Local Limited Partnerships.

No working capital advances or repayments occurred between the Partnership and
the Local Limited Partnerships during the nine months ended September 30, 1999
and 1998.  The combined amount carried as due to the Partnership by the Local
Limited Partnerships was $522,159 as of September 30, 1999.  Future advances
made will be charged to operations; likewise, future repayments will be credited
to operations.

The following are combined statements of operations for the three and nine
months ended September 30, 1999 and 1998, respectively, of the Local Limited
Partnerships in which the Partnership has invested.  The statements are compiled
from financial statements of the Local Limited Partnerships, prepared on the
accrual basis of accounting, as supplied by the managing agents of the projects,
and are unaudited.

                       COMBINED STATEMENTS OF OPERATIONS

                                 Three Months Ended          Nine Months Ended
                                    September 30,              September 30,
                                 1999          1998         1999         1998

Rental income                $1,387,400    $1,533,220   $4,457,222   $4,593,927
Other income                     64,913        82,504      192,738      225,345
Total income                  1,452,313     1,615,724    4,649,960    4,819,272

Operating expenses              860,162     1,002,531    2,759,245    3,171,021
Interest, taxes, and insurance  571,288       541,321    1,684,394    1,640,209
Depreciation                    240,641       237,264      719,399      711,679
Total expense                 1,672,091     1,781,116    5,163,038    5,522,909

Net income (loss)            $ (219,778)   $ (165,392)  $ (513,078)  $ (703,637)

National Housing Partnership
Realty Fund III share of
losses                       $ (215,714)   $ (162,510)  $ (503,913)  $ (691,089)


(3) TRANSACTIONS WITH THE GENERAL PARTNER

During each of the nine month periods ended September 30, 1999 and 1998, the
Partnership accrued administrative and reporting fees to the General Partner in
the amount of $64,686 for services provided to the Partnership.  The Partnership
did not make any payments to the General Partner for these fees during each of
the respective periods.  The amount due the General Partner by the Partnership
for administrative and reporting fees was $150,934 at September 30, 1999.

The advances and accrued administrative and reporting fees payable to the
General Partner will be paid as cash flow permits or from proceeds generated
from the sale or refinancing of one or more of the underlying properties of the
Local Limited Partnerships.

(4) SEGMENT INFORMATION

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

(5) LEGAL PROCEEDINGS

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

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


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

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

LIQUIDITY AND CAPITAL RESOURCES

The properties in which the Local Limited Partnerships have invested receive one
or more forms of assistance from the Federal Government.  As a result, the Local
Limited Partnerships' ability to transfer funds either to the Partnership or
among themselves in the form of cash distributions, loans or advances is
generally restricted by these government assistance programs.  These
restrictions, however, are not expected to impact the Local Limited
Partnerships' ability to meet its cash obligations.

For the past several years, various proposals have been advanced by HUD,
Congress and others proposing the restructuring of HUD's rental assistance
programs under Section 8 of the United States Housing Act of 1937 ("Section 8"),
under which 503 apartment units, 41 percent of the total apartment units owned
by the properties in which the Partnership has invested, receive rental
subsidies.  On October 27, 1997, the President signed into law the Multifamily
Assisted Housing Reform and Affordability Act of 1997 (the "1997 Housing Act").
Under the 1997 Housing Act, certain properties assisted under Section 8, with
rents above market levels and financed with HUD-insured mortgage loans, will be
restructured by adjusting subsidized rents to market levels, thereby potentially
reducing rent subsidies, and lowering required debt service costs as needed to
ensure financial viability at the reduced rents and rent subsidies.  The 1997
Housing Act retains project-based subsidies for most properties (properties in
rental markets with limited supply, properties serving the elderly, and certain
other properties).  The 1997 Housing Act phases out project-based subsidies on
selected properties servicing families not located in rental markets with
limited supply, converting such subsidies to a tenant-based subsidy.  Under a
tenant-based system, rent vouchers would be issued to qualified tenants who then
could elect to reside at properties of their choice, provided such tenants have
the financial ability to pay the difference between the selected properties'
monthly rent and the value of the vouchers, which would be established based on
HUD's regulated fair market rent for the relevant geographical areas.  The 1997
Housing Act provides that properties will begin the restructuring process in
Federal Fiscal Year 1999 (beginning October 1, 1998), and that HUD will issue
final regulations implementing 1997 Housing Act on or before October 27, 1999.
With respect to Housing Assistance Payments Contracts ("HAP" Contracts) expiring
before October 1, 1998, Congress has elected to renew them for one-year terms,
generally at existing rents, so long as the properties remain in compliance with
the HAP Contracts.  While the Partnership does not expect the provisions of the
1997 Housing Act to result in a significant number of tenants relocating from
properties owned by the Local Limited Partnerships, there can be no assurance
that the provisions will not significantly affect the operations of the
properties of the Local Limited Partnerships.  Furthermore, there can be no
assurance that other changes in Federal housing subsidy policy will not occur.
Any such changes could have an adverse effect on the operations of the
Partnership.

The Partnership's liquidity based on cash and cash equivalents decreased to
$540,567 at September 30, 1999, as compared to $594,835 at December 31, 1998.
The decrease was due to the Partnership's operating expenses more than
offsetting the interest received by the Partnership.  The Partnership's existing
cash plus any distributions from the underlying operations of the Local Limited
Partnerships is expected to adequately fund the operations of the Partnership in
the current year. However, there can be no assurance that future distributions
will be adequate to fund the operations beyond the current year.

No working capital advances or repayments were made between the Partnership and
the Local Limited Partnerships during the nine months ended September 30, 1999
and 1998.  The combined amount carried as due to the Partnership by the Local
Limited Partnerships was $522,159, at September 30, 1999.  Future advances made
will be charged to operations; likewise, future repayments will be credited to
operations.

Distributions received from Local Limited Partnerships represent the
Partnership's proportionate share of the excess cash available for distribution
from the Local Limited Partnerships.  As a result of the use of the equity
method of accounting for the Partnership's investments, as of September 30,
1999, investments in nine Local Limited Partnerships had been reduced to zero.
For these investments, cash distributions received are recorded in income as
distributions received in excess of investment in Local Limited Partnerships.
For those investments not reduced to zero, distributions received are recorded
as distributions from Local Limited Partnerships.  There were no cash
distributions during the nine months ended September 30, 1999.  The cash
distribution during the nine months ended September 30, 1998, is the result of
proceeds from the sale of local limited partnership properties in 1997.  The
receipt of distributions in future quarters and years is dependent upon the
operations of the underlying properties of the Local Limited Partnerships to
generate sufficient cash for distribution in accordance with applicable HUD
regulations.

All of the Local Limited Partnerships in which the Partnership has invested
carry deferred acquisition notes due to the original owner of each Property.
The deferred acquisition notes related to Meadowwood Townhouses III Limited
Partnership as discussed below reached final maturity in January 1998.  All
other notes will reach final maturity during 1999.  These notes are secured by
both the Partnership's and the General Partner's interests in the Local Limited
Partnerships.  In the event of a default of the notes, the note holders would be
able to assume the General Partner's and the Partnership's interests in the
Local Limited Partnerships.  There can be no assurance that the General Partner
will be successful in extending or restructuring the deferred acquisition notes
as they mature.

Meadowood Townhouses III Limited Partnership's notes payable, plus accrued
interest, were due and payable upon the earlier of the sale, transfer, or
refinancing of the Local Limited Partnership or April 30, 1997.  A Forbearance
Agreement was executed, which extended the maturity date of these non-recourse
notes payable and accrued interest.  Under the terms of this agreement, the
initial period of forbearance expired on April 30, 1997.  Such funding was not
approved by April 30, 1997 and a further extension of forbearance until January
2, 1998 was granted to permit the General Partner to submit an alternative plan
to the noteholders, and to negotiate and close such plan.  An amendment to the
Forbearance Agreement requires the Local Limited Partnership to market the
property for sale. If the sale is not closed by November 1999, the noteholders
will have the right to foreclose on such Local Limited Partnership's property.
The Forbearance Agreement provides for sharing of net sale proceeds between the
Partners and noteholders.  Such proceeds allocated to the noteholders would be
in full satisfaction of the notes payable and the related interest.  Meadowood
Townhouse III Limited Partnership's continued existence as a going concern with
its present ownership structure is dependent on its successful efforts to repay
the principal and accrued interest on the notes payable, or to negotiate further
amendments of the terms of the notes and the related forbearance agreements.

Brunswick Village Limited Partnership's note payable, plus accrued interest,
became due on February 28, 1999.  The Local Limited Partnership did not have the
resources to pay amounts due on the note payable.  On August 16, 1999, the note
holder foreclosed on the Partnership's interest on the Brunswick Village limited
partnership which secured the Note.  No gain or loss was recorded as a result of
this transfer of partnership interest.  With the loss of the Partnership's
interest to the note holder, the Partnership will not receive any future
benefits from this Local Limited Partnership and taxable income will be
generated and flow to the Partnership's investors without any distributable cash
for the current year.  The specific impact of the tax consequences is dependent
upon each specific partner's individual tax situation.

The remaining eight Local Limited Partnerships' notes payable, plus accrued
interest, are due in December 1999.  As of October 1, 1999, the Local Limited
Partnerships' have not renegotiated the terms of the notes, including the
extension of the due date.  Continuation of the Local Limited Partnerships'
operations in the present form is dependent on their ability to extend the
maturity dates of these notes or to repay or refinance the notes.

RESULTS OF OPERATIONS

The Partnership has invested as a limited partner in Local Limited Partnerships
which operate nine rental housing properties.  In prior years, results of
operations of the Partnership were significantly impacted by the Partnership's
share of the losses of the Local Limited Partnerships.  These losses included
depreciation and accrued deferred acquisition note interest expense which are
non-cash in nature. Because the investments in and advances to Local Limited
Partnerships have been reduced to zero, the Partnership's share of the
operations of the Local Limited Partnerships is no longer being recorded.

The Partnership had a net loss of $95,588 for the nine months ended September
30, 1999, compared to a net loss of $99,456 for the nine months ended September
30, 1998.  The decrease in net loss was due to an increase in interest income
and a decrease in costs and expenses.  The Partnership did not recognize
$503,913 of its allocated share of losses from the Local Limited Partnerships
for the nine months ended September 30, 1999, as the Partnership's net carrying
basis in these Partnerships had been previously reduced to zero.  The
Partnership's share of losses from the Local Limited Partnerships, if not
limited to its investment account balance, would have decreased $187,176 between
the periods ended September 30, 1999 compared to the nine months ended September
30, 1998.

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year.  The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent").  Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000.  This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999.  The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated.  However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation.  To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems.  The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase

Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional.  In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance.  The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of July 31, 1999, had completed approximately 90% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.  The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999.  The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.

Computer Software:

The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs.  Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system.  The estimated completion date for this project is October, 1999.

During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems.  The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems.  The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September 30, 1999.  The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance.  In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems.  While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.

A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues.  A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed by September 30, 1999.  Any
operating equipment that is found non-compliant will be repaired or replaced.

The total cost incurred for all properties managed by the Managing Agent as of
July 31, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness.  The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999.  The Managing Agent has updated data transmission standards with all of
the financial institutions.  The Managing Agent's contingency plan was to move
accounts from any institution that could not certified Year 2000 compliant by
September 1, 1999.  All financial institutions have communicated that they are
Year 2000 compliant and accordingly no accounts were required to be moved from
the existing financial institutions.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent).  To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership.  However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows.  To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project.  Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized.  The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner.  As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program.  In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur.  The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership.  The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records.  The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others.  These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.


                          PART II - OTHER INFORMATION


ITEM 1    LEGAL PROCEEDINGS

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

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

          a)   Exhibits:

               Exhibit 27, Financial Data Schedule

          b)   Reports on Form 8-K:

               None filed during the quarter ended September 30, 1999.


                                   SIGNATURES



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


                              NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                              (Registrant)


                              By:  The National Housing Partnership,
                                   Its sole General Partner


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


                              By:  /s/Patrick J. Foye
                                   Patrick J. Foye
                                   Executive Vice President


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


                              Date: