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 March 31, 2000


[ ] 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___

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

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

                         Statement of Financial Position

                                   (Unaudited)

                                 (in thousands)

                                 March 31, 2000


ASSETS
   Cash and cash equivalents                                          $ 546
   Investments in and advances to Local Limited
      Partnerships (Note 2)                                              --
                                                                      $ 546

LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
Liabilities
   Administrative and reporting fee payable to
      General Partner (Note 3)                                        $ 155
   Accrued expenses                                                      38
                                                                        193

Partners' (deficit) equity
   General Partner -- The National Housing
      Partnership (NHP)                                                 (92)
   Original Limited Partner -- 1133 Fifteenth
      Street Associates                                                 (96)
   Other Limited Partners -- 11,490 investment units                    541
                                                                        353
                                                                      $ 546

                   See Accompanying Notes to Financial Statements

<PAGE>

b)

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

                            Statements of Operations

                                   (Unaudited)

                        (in thousands, except per unit data)



                                                             Three Months Ended
                                                                 March 31,
                                                            2000            1999
REVENUES:
  Interest income                                           $  9            $ 6

COSTS AND EXPENSES:
  Administrative and reporting fees to General
   Partner                                                    14             22
  Other operating expenses                                    11             18
                                                              25             40

NET LOSS                                                   $ (16)         $ (34)

NET LOSS ASSIGNABLE TO LIMITED PARTNERS                    $ (16)         $ (33)

NET INCOME (LOSS) PER LIMITED PARTNERSHIP
  INTEREST                                                $(1.39)        $(2.88)

                   See Accompanying Notes to Financial Statements

<PAGE>

c)

                    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 Two     Limited
                                     (NHP)      Associates     Partners      Total
(Deficit) equity at
<S>         <C> <C>                  <C>           <C>          <C>          <C>
   December 31, 1999                 $ (92)        $ (96)       $ 557        $ 369

Net loss for the three months
   ended March 31, 2000                 --            --          (16)         (16)

(Deficit) equity at
   March 31, 2000                    $ (92)        $ (96)       $ 541        $ 353

Percentage interest at
   March 31, 2000                        1%            1%          98%         100%
                                        (A)           (B)          (C)
</TABLE>


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists of 11,490 investment units


                   See Accompanying Notes to Financial Statements

<PAGE>

d)

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

                            Statements of Cash Flows

                                   (Unaudited)

                                 (in thousands)


<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                       March 31,
                                                                  2000        1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>           <C>
   Interest received                                              $   9         $ 6
   Operating expenses paid                                           (3)         (2)
   Net cash provided by operating activities                          6           4

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      540         595

CASH AND CASH EQUIVALENTS, END OF PERIOD                         $  546       $ 599

RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
   OPERATING ACTIVITIES:
     Net loss                                                    $  (16)      $ (34)

     Adjustments to reconcile net loss to net cash provided
      by operating activities:
      Increase in administrative and reporting fees
        payable                                                      14          22
      Increase in accrued expenses                                    8          16

          Total adjustments                                          22          38

     Net cash provided by operating activities                    $   6         $ 4
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>

e)

                    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  interest at a price of $1,000 per  interest.  During  1985,  the sale of
interests was terminated after the sale of 11,500 interests.

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"). The
acquisitions were made pursuant to a Real Estate Acquisition Agreement, dated as
of May 22, 1997 (the "Agreement"), by and among AIMCO, AIMCO Properties, L.P., a
Delaware  limited  partnership (the "Operating  Partnership"),  Demeter Holdings
Corporation,  a Massachusetts  corporation  ("Demeter"),  Phemus Corporation,  a
Massachusetts  corporation  ("Phemus"),  Capricorn  Investors,  L.P., a Delaware
limited partnership ("Capricorn"),  J. Roderick Heller, III and NHP Partners Two
LLC, a Delaware limited liability company ("NHP Partners Two LLC"). 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 the general partners of
NHP at the  time  the  Partnership  was  formed.  The  general  partner  of 1133
Fifteenth Street Associates is NHP.

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.

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, 1999.

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

The Partnership owned a 94.5% limited partnership  interest (98% with respect to
the  allocation  of  losses) in seven  Local  Limited  Partnerships,  which were
foreclosed  upon during the three  months  ended March 31, 2000 (see  discussion
below): 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 owns a 94.5% limited partnership interest
(98% with  respect  to the  allocation  of  losses)  in Edmond  Estates  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.

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, Woodmark,  Kimberly Associates,  Edmond
Estates, Galion, Indian Valley I, Indian Valley II, Indian Valley III and Newton
Hill Limited  Partnerships  all have 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 are nonrecourse and are  subordinated to
the  respective  mortgage  notes on each property for as long as HUD insures the
mortgage  notes.  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 notes.  The notes were due in November 1999 for
Meadowood  Townhouse  III  and  in  December  1999  for  the  remaining  Limited
Partnerships.  During the three months  ended March 31,  2000,  the note holders
foreclosed on the Partnership's  interest in Woodmark,  Galion, Indian Valley I,
Indian Valley II, Indian Valley III, Newton Hill, and Kimberly Associates.  With
the loss of the Partnership's interest to the note holders, the Partnership will
not  receive  any future  benefits  from these Local  Limited  Partnerships  and
taxable  income  generated  prior to the  foreclosures  will be allocated 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.  During the three  months ended March 31,
2000,  the  note  holder  began  foreclosure  proceedings  on the  Partnership's
interest  in  Meadowood   Townhouses  III.   Regarding  Edmond  Estates  Limited
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 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.

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
holders  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 holders, the Partnership will not receive any
future benefits from this Local Limited Partnership.

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,  the Partnership's  investments 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  approximately $136,000 and $76,000 of losses from
its Local Limited  Partnerships during the three months ended March 31, 2000 and
1999,  respectively.  As of March 31, 2000, the Partnership has not recognized a
total of  approximately  $5,768,000 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 two Local  Limited  Partnerships  has been reduced to
zero at March 31,  2000.  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.

A working  capital loan of  approximately  $5,000 was made by the Partnership to
the Local Limited  Partnerships during the three months ended March 31, 2000. No
working capital advances or loans occurred between the Partnership and the Local
Limited  Partnerships during the three months ended March 31, 1999. The combined
amount carried as due to the Partnership by the Local Limited  Partnerships  was
approximately  $103,000  as of March  31,  2000.  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 months ended
March 31, 2000 and 1999,  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
                                                     March 31,
                                                2000            1999
                                                   (in thousands)
         Rental income                          $ 673          $1,504
         Other income                              16              60
            Total income                          689           1,564

         Operating expenses                       485             854
         Interest, taxes, and insurance           268             550
         Depreciation                              75             237
            Total expense                         828           1,641

         Net income (loss)                     $ (139)         $  (77)

         National Housing Partnership
            Realty Fund III share of
            losses                             $ (136)         $  (76)

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the three month  periods ended March 31, 2000 and 1999,  the  Partnership
accrued  administrative  and reporting fees to the General Partner in the amount
of approximately $14,000 and $22,000, respectively, for services provided to the
Partnership.  The  Partnership  did not make any payments to the General Partner
for these  fees  during  either of the  respective  periods.  The amount due the
General  Partner by the Partnership  for  administrative  and reporting fees was
approximately $155,000 at March 31, 2000.

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 ("IG"). To
date, neither the HUD IG 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  and  AIMCO  are
cooperating with the  investigations  and do not believe that the investigations
will result in a material adverse impact on its 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.

<PAGE>

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

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, Woodmark,  Kimberly Associates,  Edmond
Estates, Galion, Indian Valley I, Indian Valley II, Indian Valley III and Newton
Hill Limited  Partnerships  all have 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 are nonrecourse and are  subordinated to
the  respective  mortgage  notes on each property for as long as HUD insures the
mortgage  notes.  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 notes.  The notes were due in November 1999 for
Meadowood  Townhouse  III  and  in  December  1999  for  the  remaining  Limited
Partnerships.  During the three months  ended March 31,  2000,  the note holders
foreclosed on the Partnership's  interest in Woodmark,  Galion, Indian Valley I,
Indian Valley II, Indian Valley III, Newton Hill, and Kimberly Associates.  With
the loss of the Partnership's interest to the note holders, the Partnership will
not receive any future benefits from these Local Limited Partnership and taxable
income   generated  prior  to  the   foreclosures   will  be  allocated  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.  During the three  months ended March 31,
2000,  the note  holders  began  foreclosure  proceedings  on the  Partnership's
interest  in  Meadowood   Townhouses  III.   Regarding  Edmond  Estates  Limited
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 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.

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
holders  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 holders, the Partnership will not receive any
future benefits from this Local Limited Partnership.

The  Partnership's  liquidity  based on cash and cash  equivalents  increased to
approximately  $546,000 at March 31, 2000, as compared to approximately $540,000
at December  31, 1999.  The increase was due to the fact that the  Partnership's
interest  received  more  than  offset  the  operating   expenses  paid  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.

A working  capital loan of  approximately  $5,000 was made by the Partnership to
the Local Limited  Partnerships during the three months ended March 31, 2000. No
working  capital  advances or loans were made  between the  Partnership  and the
Local  Limited  Partnerships  during the three months ended March 31, 1999.  The
combined  amount  carried  as due  to  the  Partnership  by  the  Local  Limited
Partnerships was approximately  $103,000 at March 31, 2000. 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  March  31,  2000,
investments in the remaining two 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 three months ended March 31, 2000 and 1999. 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 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.

RESULTS OF OPERATIONS

The  Partnership  retains an  investment  as a limited  partner in Local Limited
Partnerships  which  operate  two 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  approximately  $16,000 for the three months
ended March 31, 2000,  compared to a net loss of  approximately  $34,000 for the
three  months  ended  March 31,  1999.  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  approximately  $136,000 of its allocated share of
losses from the Local Limited  Partnerships for the three months ended March 31,
2000, as the  Partnership's  net carrying basis in these  Partnerships  had been
previously  reduced to zero. The  Partnership's  investment  equity in the Local
Limited  Partnerships,  if not limited to its investment account balance,  would
have  decreased  approximately  $10,147,000  between the periods ended March 31,
2000  compared to the three  months  ended March 31, 1999  primarily  due to the
foreclosure of the Partnership's  interest in seven Local Limited  Partnerships.

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.     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 ("IG"). To
date, neither the HUD IG 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  and  AIMCO  are
cooperating with the  investigations  and do not believe that the investigations
will result in a material adverse impact on its 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 March 31, 2000.

<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
                                          President

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

                                    Date: