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

                                   Form 10-QSB

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

                 For the quarterly period ended September 30, 2002


[ ]   TRANSITION REPORT UNDER 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.)

                         55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

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




<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS


                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                         Statement of Financial Position
                                   (Unaudited)
                        (in thousands, except unit data)

                               September 30, 2002



ASSETS
   Cash and cash equivalents                                          $ 684
   Accounts receivable                                                  341
                                                                     $1,025
LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
Liabilities
   Accrued expenses                                                   $ 24
                                                                        24

Partners' (deficit) equity
   General Partner -- The National Housing
      Partnership (NHP)                                                 (85)
   Original Limited Partner -- 1133 Fifteenth
      Street Three Associates                                           (89)
   Other Limited Partners -- 11,254 investment units                  1,175
                                                                      1,001
                                                                     $1,025


                   See Accompanying Notes to Financial Statements

<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                            Statements of Operations
                                   (Unaudited)
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>


                                       Three Months Ended         Nine Months Ended
                                          September 30,             September 30,
                                       2002          2001          2002         2001
Revenues:
  Distribution in excess of
   investment in Local Limited
<S>                                   <C>            <C>          <C>         <C>
   Partnership                        $    20        $ --         $    20     $    --
  Interest income                           1             4             2          17
                                           21             4            22          17
costs and expenses:
  Share of loss from investment
    in Local Limited Partnership           --            --             1          --
  Administrative and reporting
    fees to General Partner
    (Note 3)                                1             4             4          11
  Other operating expenses                 11            20            39          61
                                           12            24            44          72

Net income (loss)                       $ 9          $ (20)       $   (22)    $   (55)

Allocation of net income (loss):
  General Partner - NHP                $ --          $ --         $    --     $    --
  Original Limited Partner --
  1133 Fifteenth Street Three
  Associates                               --            --            --          --
  Other Limited Partners                    9           (20)          (22)        (55)

                                        $ 9          $ (20)       $   (22)    $   (55)
Net income (loss) per other
  limited partnership interest         $ .79        $ (1.74)      $ (1.95)    $ (4.79)

                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                     Statement of Partners' (Deficit) Equity
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>


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

(Deficit) equity at
<S>         <C> <C>                  <C>           <C>          <C>          <C>
   December 31, 2001                 $ (85)        $ (89)       $1,197       $1,023

Net loss for the nine months
   ended September 30, 2002             --             --          (22)         (22)

(Deficit) equity at
   September 30, 2002                $ (85)        $ (89)       $1,175       $1,001

Percentage interest at
   September 30, 2002                    1%            1%           98%        100%
                                        (A)           (B)           (C)


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists  of 11,254  investment  units at  September  30,  2002 and 11,300
      investment  units at  December  31,  2001.  During the nine  months  ended
      September 30, 2002, 46 units were abandoned (Note 6).

                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>



                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                            Statements of Cash Flows
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,
                                                                  2002        2001
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>         <C>
   Interest received                                              $ 2         $ 17
   Distribution in excess of investment in Local
     Limited Partnership                                             20          --
   Payment of administrative and reporting fees                     (21)         --
   Operating expenses paid                                          (14)        (73)
   Net cash used in operating activities                            (13)        (56)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Distributions from Local Limited Partnership recognized
    as return of capital                                           651           --

CASH FLOWS FROM FINANCING ACTIVITIES:
   Withholding taxes paid for limited partners                     (192)       (138)
   Principal payments on loans or notes payable                      --          (2)
   Net cash used in financing activities                           (192)       (140)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                446        (196)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      238         468

CASH AND CASH EQUIVALENTS, END OF PERIOD                         $ 684        $ 272

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
   ACTIVITIES:
     Net loss                                                    $ (22)       $ (55)

     Adjustments to reconcile net loss to net cash used in
      operating activities:
      Share of loss from investment in Local Limited
        Partnership                                                   1          --
      (Decrease) increase in administrative and reporting
        fees payable                                                (16)         11
      Increase (decrease) in accrued expenses                        24         (12)

          Total adjustments                                           9          (1)

     Net cash used in operating activities                       $ (13)       $ (56)

                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>








                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                          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 National Housing  Partnership,  a District of Columbia  limited  partnership
("NHP" or the  "General  Partner"),  was  authorized  to raise  capital  for the
Partnership by offering and selling to additional limited partners not more than
11,500  interests at a price of $1,000 per  interest.  During 1985,  the sale of
interests was terminated after the sale of 11,500 interests. As of September 30,
2002, 11,254 limited partnership interests were outstanding.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  ("AIMCO" and,  together with its  subsidiaries and other controlled
entities, the "AIMCO Group"), acquired all of the issued and outstanding capital
stock of NHP Partners,  Inc., a Delaware  corporation ("NHP Partners"),  and the
AIMCO Group  acquired  all of the  outstanding  interests  in NHP  Partners  Two
Limited  Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP
Partners owns all of the outstanding  capital stock of the National  Corporation
for Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is
the general partner of The National Housing Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions,  the AIMCO
Group has  acquired  control  of the  general  partner  of the  Registrant  and,
therefore, may be deemed to have acquired control of the Registrant.

The Original  Limited Partner of the Partnership is 1133 Fifteenth  Street Three
Associates,  whose  limited  partners were key employees of NCHP at the time the
Partnership was formed and whose general partner is NHP.


<PAGE>



Basis of Presentation

The accompanying  unaudited interim financial statements reflect all adjustments
which are, in the opinion of management,  necessary for a fair  presentation  of
the  financial  condition  and results of  operations  for the  interim  periods
presented.  All such adjustments are of a normal and recurring nature. Operating
results for the three and nine month  periods  ended  September 30, 2002 are not
necessarily  indicative  of the results that may be expected for the fiscal year
ended December 31, 2002.

While the General Partner  believes that the disclosures  presented are adequate
to make the  information  not  misleading,  it is suggested that these financial
statements  be read in  conjunction  with the  financial  statements  and  notes
included in the  Partnership's  Annual  Report filed on Form 10-KSB for the year
ended December 31, 2001.

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

At September 30, 2002, the Partnership owns a 94.5% limited partnership interest
(98% with respect to  allocation  of losses) in one Local  Limited  Partnership,
Edmond Estates  Limited  Partnership.  The  Partnership  also owns a 99% limited
partnership interest in Meadowood Townhouses III Limited Partnership. This Local
Limited  Partnership  owned a 99% limited  partnership  interest in an operating
limited  partnership  which held title to one rental housing  property which was
sold in 2001. The  Partnership's  effective  interest in this operating  limited
partnership  is  98.01%.  Once  the  remaining  cash  of the  operating  limited
partnership  and the  Local  Limited  Partnership  is  disbursed,  they  will be
terminated.

Since the Partnership does not exercise control over the activities of the Local
Limited  Partnerships  in  accordance  with  the  partnership  agreements,   the
Partnership's  investments are accounted for using the equity method.  Thus, the
investments  are  carried  at cost  plus the  Partnership's  share of the  Local
Limited  Partnerships'  profits less the Partnerships share of the Local Limited
Partnerships losses and distributions. However, since the Partnership is neither
legally  liable  for the  obligations  of the Local  Limited  Partnerships,  nor
otherwise committed to provide additional support to them, it does not recognize
losses  once  its  investment,   reduced  for  its  share  of  losses  and  cash
distributions,   reaches  zero  in  each  of  the   individual   Local   Limited
Partnerships.  As a result,  the  Partnership  did not  recognize  approximately
$46,000 of its share of losses and  $50,000  of its  allocated  share of profits
from  one and two  Local  Limited  Partnerships  during  the nine  months  ended
September  30,  2002 and 2001,  respectively.  As of  September  30,  2002,  the
Partnership had not recognized  approximately  $2,478,000 of its allocated share
of cumulative losses from one Local Limited  Partnership in which its investment
is zero.

With  the  sale of the  property  owned  by  Meadowood  Townhouses  III  Limited
Partnership,  the Partnership's  share of income for the year ended December 31,
2001  was  sufficient  to  both  recover  prior  years'  losses  not  previously
recognized  and to result in equity  income in  investment  in the Local Limited
Partnership.  At December 31, 2001,  the  Partnership  had an  investment in the
Local Limited  Partnership  of  approximately  $652,000  which  represented  the
residual cash from the sale of the property  owned by Meadowood  Townhouses  III
Limited Partnership.  During the nine months ended September 30, 2002, the Local
Limited  Partnership  recognized  approximately  $1,000 in  equity  loss and the
Partnership  received a distribution  of  approximately  $651,000 from Meadowood
Townhouses III Limited Partnership which reduced the Partnership's investment in
the  Local  Limited  Partnership  to  zero.  The  Partnership  also  received  a
distribution  in excess of its  investment in the Local Limited  Partnership  of
approximately  $20,000 from Meadowood  Townhouses III Limited Partnership during
the nine months ended September 30, 2002.

Edmond  Estates  Limited  Partnership  has a  note  which  was  executed  by the
respective Limited Partnership with the seller as part of the acquisition of the
property by the Limited Partnership. The note is nonrecourse and is subordinated
to the  respective  mortgage note on the property for as long as HUD insures the
mortgage  note.  Any payments  due from project  income are payable from surplus
cash,  as  defined  by  the  HUD  Regulatory  Agreement.   Neither  the  Limited
Partnership  nor any partner  thereof,  present or future,  assume any  personal
liability  for the payment of the note.  The note was due in  December  1999 for
Edmond  Estates  Limited  Partnership.  Regarding  Edmond  Estates  Partnership,
interest continues to be accrued under the original terms of the note agreement.
The note is in  default  and the  Limited  Partnership  interest  is  subject to
foreclosure.  The property is currently being marketed for sale, but there is no
guarantee  that the property  will sell or, if sold,  that the sale  transaction
will generate  sufficient  proceeds to pay the accrued interest and principal of
the note. The financial  statements do not include any  adjustments  which might
result from the outcome of this uncertainty.

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  Partnership,  the  aggregate  balance of  investment  in and
advances to the remaining Local Limited  Partnership has been reduced to zero at
September 30, 2002. To the extent these advances are repaid by the Local Limited
Partnership in the future,  the repayments will be credited as distributions and
repayments received in excess of investment in Local Limited Partnership.  These
advances  are  carried  as a payable  to the  Partnership  by the Local  Limited
Partnership and at September 30, 2002 is approximately $31,000.

During the nine months ended September 30, 2001 the Partnership  advanced one of
the Local Limited Partnerships  approximately $8,000 to cover partnership entity
expenses.  As noted above this amount has been included in operating expense for
the nine months ended  September 30, 2001.  There were no such advances made for
the nine months ended September 30, 2002.

During the nine months ended  September  30, 2002 the General  Partner  advanced
approximately  $57,000  to  one  of  the  Local  Limited  Partnerships  to  fund
partnership   entity  expenses.   During  2000,  the  General  Partner  advanced
approximately   $5,000  to  one  of  the  Local  Limited  Partnerships  to  fund
partnership  entity  expenses.  During the nine months ended September 30, 2001,
the Local Limited  Partnership  repaid the General Partner for this advance.  No
advances were made by the General  Partner during the nine months ended June 30,
2001. The balance owed to the General Partner by the Local Limited  Partnerships
at September  30, 2002 is  approximately  $68,000.  Interest is charged at prime
plus 2% or 6.75% at September 30, 2002.

The  following are combined  statements of operations  for the nine months ended
September 30, 2002 and 2001, respectively,  of the Local Limited Partnerships in
which the Partnership has invested.

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                      Three Months Ended         Nine Months Ended
                                         September 30,             September 30,
                                      2002          2001         2002         2001
                                        (in thousands)             (in thousands)

<S>                                  <C>           <C>           <C>        <C>
Rental income                        $ 134         $ 454         $ 382      $ 1,389
Other income                              8            21            23          62
   Total income                         142           475           405       1,451

Operating expenses                       92           226           296         761
Interest, taxes, and insurance           33           145           101         426
Depreciation                             18            72            55         213
   Total expense                        143           443           452       1,400

Net (loss) income                     $ (1)         $ 32         $ (47)       $ 51

National Housing Partnership
  Realty Fund III share of
   (loss) income                      $ (1)         $ 32         $ (46)       $ 50
</TABLE>

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the nine  months  ended  September  30,  2002 and 2001,  the  Partnership
accrued  administrative  and reporting fees to the General Partner in the amount
of approximately $4,000 and $11,000,  respectively, for services provided to the
Partnership.  The  Partnership  made a payment to the General  Partner for these
fees of  approximately  $21,000 during the nine months ended September 30, 2002.
The  Partnership did not make any payments to the General Partner for these fees
during the nine months ended September 30, 2001.

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)   GOING CONCERN

The remaining Local Limited  Partnership's note payable was due during 1999 (see
Note 2). The note is in default and the Limited Partnership  interest is subject
to foreclosure.  The property is currently being marketed for sale, but there is
no guarantee that the property will sell or, if sold, that the sale  transaction
will generate  sufficient  proceeds to pay the accrued interest and principal of
the note. The financial  statements do not include any  adjustments  which might
result from the outcome of this uncertainty.


<PAGE>



(5)   LEGAL PROCEEDINGS

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

(6) ABANDONMENT OF LIMITED PARTNERSHIP UNITS

During  the nine  months  ended  September  30,  2002,  the  number  of  Limited
Partnership Units decreased by 46 units due to limited partners abandoning their
units. In abandoning his or her Limited  Partnership  Unit(s), a limited partner
relinquishes all right, title, and interest in the Partnership as of the date of
abandonments.  However, the limited partner is allocated his or her share of net
income or loss for that year. The income or loss per Limited Partnership Unit in
the  accompanying  statements of operations is calculated based on the number of
units  outstanding at the beginning of the year. There were no such abandonments
during the nine months ended September 30, 2001.



<PAGE>




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

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for forward-looking  statements in certain circumstances.  The matters discussed
in this report contain certain forward-looking  statements,  including,  without
limitation,  statements regarding future financial performance and the effect of
government regulations. The discussions of the Registrant's business and results
of operations,  including forward-looking statements pertaining to such matters,
do not take into account the effects of any changes to the Registrant's business
and  results of  operations.  Actual  results may differ  materially  from those
described in the forward-looking statements and will be affected by a variety of
risks and factors  including,  without  limitation:  national and local economic
conditions; the terms of governmental regulations that affect the Registrant and
interpretations of those regulations;  the competitive  environment in which the
Registrant  operates;  financing risks,  including the risk that cash flows from
operations  may be  insufficient  to meet  required  payments of  principal  and
interest;  real estate risks, including variations of real estate values and the
general  economic  climate in local markets and  competition for tenants in such
markets; and possible environmental liabilities. Readers should carefully review
the Registrant's financial statements and the notes thereto, as well as the risk
factors  described in the documents the Registrant  files from time to time with
the Securities and Exchange Commission.

LIQUIDITY AND CAPITAL RESOURCES

All of the Local  Limited  Partnerships  in which the  Partnership  has invested
carry notes payable due the original  owner of each  Property.  All of the notes
reached  final  maturity  during  1999.  These  notes  were  secured by both the
Partnership's  and  the  General  Partner's   interests  in  the  Local  Limited
Partnerships.  Meadowood  Townhouses III and Edmond Estates Limited Partnerships
both had notes which were executed by the respective  Limited  Partnerships with
the  seller  as  part  of  the  acquisition  of  the  property  by  the  Limited
Partnership.  The notes were nonrecourse and were subordinated to the respective
mortgage  notes on each property for as long as HUD insures the mortgage  notes.
Any payments due from project  income were payable from surplus cash, as defined
by the HUD Regulatory Agreement. Neither the Limited Partnership nor any partner
thereof,  present or future,  assumed any personal  liability for the payment of
the notes.  The notes were due in November 1999 for Meadowood  Townhouse III and
in December 1999 for Edmond Estates Limited  Partnerships.  Meadowood Townhouses
III Limited  Partnership had a note which was executed by the respective Limited
Partnership  with the seller as part of the  acquisition  of the property by the
Limited  Partnership.  The  note was  nonrecourse  and was  subordinated  to the
respective  mortgage note on the property.  With the sale of the property during
2001 and the full payment of the mortgage note, a portion of remaining  proceeds
were used to make a payment on the deferred acquisition note. The holder of this
note has accepted a discount on the note as the proceeds were not  sufficient to
fully  satisfy  the  unpaid  amount  at the time of the sale.  Regarding  Edmond
Estates Limited Partnership, interest continues to be accrued under the original
terms of the note agreements. The note is in default and the Limited Partnership
interest is subject to foreclosure. The property is currently being marketed for
sale,  but there can be no assurance  that the  property  will sell or, if it is
sold, that the sale  transaction  will generate  sufficient  proceeds to pay the
accrued  interest and  principal of the note.  The  financial  statements do not
include any adjustments which might result from the outcome of this uncertainty.

The  Partnership's  liquidity  based on cash and cash  equivalents  increased to
approximately  $684,000 at  September  30,  2002 as  compared  to  approximately
$238,000 at December 31, 2001. The increase was due to a  distribution  from the
sale of the property owned by Meadowood  Townhouses III Limited  Partnership and
interest  income  received as a result of cash  balances  maintained in interest
bearing  accounts,  partially  offset by the payment of  operating  expenses and
withholding  taxes on behalf of the  limited  partners of 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.

The General  Partner  monitors  developments in the area of legal and regulatory
compliance and is studying new federal laws, including the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional  compliance
measures with regard to governance,  disclosure, audit and other areas. In light
of these changes,  the  Partnership  expects that it will incur higher  expenses
related to compliance, including increased legal and audit fees.

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  Partnership,  the  aggregate  balance of  investments  in and
advances to the remaining Local Limited  Partnership has been reduced to zero at
September 30, 2002. To the extent these advances are repaid by the Local Limited
Partnership 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
Partnership and at September 30, 2002 is approximately $31,000.

During the nine months ended September 30, 2001 the Partnership  advanced one of
the Local Limited Partnerships  approximately $8,000 to cover Partnership entity
expenses.  As noted above this amount has been included in operating expense for
the nine months ended  September 30, 2001.  There were no such advances made for
the nine months ended September 30, 2002.

During the nine months ended  September  30, 2002 the General  Partner  advanced
approximately  $57,000  to  one  of  the  Local  Limited  Partnerships  to  fund
partnership   entity  expenses.   During  2000,  the  General  Partner  advanced
approximately   $5,000  to  one  of  the  Local  Limited  Partnerships  to  fund
partnership  entity  expenses.  During the nine months ended September 30, 2001,
the Local Limited  Partnership  repaid the General Partner for this advance.  No
advances were made by the General Partner during the nine months ended September
30,  2001.  The  balance  owed  to the  General  Partner  by the  Local  Limited
Partnerships at September 30, 2002 is approximately $68,000. Interest is charged
at prime plus 2% or 6.75% at September 30, 2002.

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, 2002,
investment in the remaining Local Limited  Partnership had been reduced to zero.
For this  investment,  cash  distributions  received  are  recorded in income as
distributions received in excess of investment in Local Limited Partnership. For
those  investments not reduced to zero,  distributions  received are recorded as
distributions  from Local  Limited  Partnership.  During the nine  months  ended
September 30, 2002, the  Partnership  received a distribution  of  approximately
$651,000 from Meadowood  Townhouses III Limited Partnership which along with the
equity loss of approximately  $1,000 from the Local Limited  Partnership reduced
the  Partnership's  investment in the Local  Limited  Partnership  to zero.  The
Partnership  also  received a  distribution  in excess of its  investment in the
Local Limited Partnership of approximately $20,000 from Meadowood Townhouses III
Limited  Partnership.  There were no cash  distributions  during the nine months
ended  September 30, 2001. 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.

The property in which the Local Limited Partnership has invested receives one or
more forms of assistance  from the Federal  Government.  As a result,  the Local
Limited  Partnership's  ability to transfer funds to the Partnership 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 Partnership's ability to meet its cash obligations.

RESULTS OF OPERATIONS

The Partnership  retains an investment as a limited partner in two Local Limited
Partnerships with only one that operates one rental housing  property.  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 investment in and advances to
Edmond Estates Limited  Partnerships has been reduced to zero, the Partnership's
share of the  operations  of the Local Limited  Partnerships  is no longer being
recorded.  With  the sale of the  property  owned by  Meadowood  Townhouses  III
Limited  Partnership,  the  Partnership's  share of  income  for the year  ended
December  31,  2001 was  sufficient  to both  recover  prior  years'  losses not
previously  recognized and to result in equity income in investment in the Local
Limited Partnership.  At December 31, 2001, the Partnership had an investment in
the Local Limited  Partnership of approximately  $652,000 which  represented the
residual cash from the sale of the property  owned by Meadowood  Townhouses  III
Limited Partnership.  During the nine months ended September 30, 2002, the Local
Limited  Partnership  recognized  approximately  $1,000 in  equity  loss and the
Partnership  received a distribution  of  approximately  $651,000 from Meadowood
Townhouses III Limited Partnership which reduced the Partnership's investment in
the  Local  Limited  Partnership  to  zero.  The  Partnership  also  received  a
distribution  in excess of its  investment in the Local Limited  Partnership  of
approximately  $20,000 from Meadowood  Townhouses III Limited Partnership during
the nine months ended September 30, 2002.

The  Partnership  had net  income  of  approximately  $9,000  and a net  loss of
approximately  $22,000 for the three and nine months  ended  September  30, 2002
compared  to a net loss of  approximately  $20,000 and $55,000 for the three and
nine months ended September 30, 2001. The increase in net income and decrease in
net loss for the three and nine months ended  September  30, 2002,  was due to a
distribution  received  from  the  sale  of  the  property  owned  by  Meadowood
Townhouses  III  Limited  Partnership  and a  decrease  in  operating  expenses.
Operating  expenses  decreased due to a decrease in advances to one of the Local
Limited Partners and  administrative  and reporting fees to the General Partner.
The Partnership did not recognize  approximately  $46,000 of its share of losses
and  $50,000 of its  allocated  share of profit  from one and two Local  Limited
Partnerships   for  the  nine  months  ended   September   30,  2002  and  2001,
respectively.  At  September  30,  2002,  the  Partnership  had  not  recognized
approximately  $2,478,000 of its allocated  share of cumulative  losses from one
Local Limited Partnership in which its investment is zero.

<PAGE>

ITEM 3.     CONTROLS AND PROCEDURES

The principal  executive officer and principal  financial officer of the General
Partner, who are the equivalent of the Partnership's principal executive officer
and  principal  financial  officer,  respectively,  have,  within 90 days of the
filing  date  of  this  quarter  report,  evaluated  the  effectiveness  of  the
Partnership's  disclosure  controls and  procedures  (as defined in Exchange Act
Rules  (13a-14(c)  and  (15d-14(c))  and have  determined  that such  disclosure
controls and procedures are adequate.  There have been no significant changes in
the Partnership's internal controls or in other factors that could significantly
affect the  Partnership's  internal  controls since the date of evaluation.  The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls. Accordingly, no corrective actions
have been taken.

<PAGE>

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a) Exhibits:

                  99    Certification of Chief Executive   Officer   and  Chief
                        Financial Officer

            b) Reports on Form 8-K:

                  None filed during the quarter ended September 30, 2002.


<PAGE>


                                   SIGNATURES



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



                                    NATIONAL HOUSING PARTNERSHIP REALTY FUND 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/Thomas C. Novosel
                                          Thomas C. Novosel
                                          Senior Vice President
                                          and Chief Accounting Officer


                                    Date:


<PAGE>

                                  CERTIFICATION

I, Patrick J. Foye, certify that:

1. I have  reviewed  this  quarterly  report on Form 10-QSB of National  Housing
Partnership Realty Fund III;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  _________ __, 2002

                                 _______________________
                                 Patrick J. Foye
                                 Executive Vice President of National
                                 Corporation for Housing Partnerships,
                                 equivalent of the chief executive officer  of
                                 the Partnership


<PAGE>



                                  CERTIFICATION


I, Paul J. McAuliffe, certify that:


1. I have  reviewed  this  quarterly  report on Form 10-QSB of National  Housing
Partnership Realty Fund III;


2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  _________ __, 2002

                                _______________________
                                Paul J. McAuliffe
                                Executive Vice President and Chief Financial
                                Officer of National  Corporation for Housing
                                Partnerships,   equivalent   of  the   chief
                                financial officer of the Partnership


<PAGE>


Exhibit 99


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002



In  connection  with the  Quarterly  Report on Form 10-QSB of  National  Housing
Realty Fund III (the  "Partnership"),  for the quarterly  period ended September
30, 2002 as filed with the Securities and Exchange Commission on the date hereof
(the  "Report"),  Patrick  J. Foye,  as the  equivalent  of the chief  executive
officer of the  Partnership,  and Paul J.  McAuliffe,  as the  equivalent of the
chief financial officer of the Partnership,  each hereby certifies,  pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/Patrick J. Foye
                                    Name:  Patrick J. Foye
                                    Date:


                                           /s/Paul J. McAuliffe
                                    Name:  Paul J. McAuliffe
                                    Date:


This  certification  accompanies  the  Report  pursuant  to  Section  906 of the
Sarbanes-Oxley  Act of 2002 and shall not,  except to the extent required by the
Sarbanes-Oxley  Act of 2002, be deemed filed by the  Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.