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 June 30, 2001


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                For the transition period from _________to _________

                         Commission file number 0-14457


                    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)


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)
                                   (in thousands)

                                  June 30, 2001



ASSETS
   Cash and cash equivalents                                          $ 271
   Accounts receivable                                                  149
                                                                      $ 420
LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
Liabilities
   Administrative and reporting fee payable to
      General Partner (Note 3)                                        $ 181
   Accrued expenses                                                      15
                                                                        196

Partners' (deficit) equity
   General Partner -- The National Housing
      Partnership (NHP)                                                 (93)
   Original Limited Partner -- 1133 Fifteenth
      Street Three Associates                                           (97)
   Other Limited Partners -- 11,480 investment units                    414
                                                                        224
                                                                      $ 420


                   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)

<TABLE>
<CAPTION>


                                       Three Months Ended          Six Months Ended
                                            June 30,                   June 30,
                                       2001          2000          2001         2000
Revenues:
<S>                                     <C>           <C>         <C>           <C>
  Interest income                      $    4        $   3        $    13      $   12

costs and expenses:
  Administrative and reporting
    fees to General Partner                 3           13              7          27
  Other operating expenses                 19           19             41          30
                                           22           32             48          57

Net loss                               $  (18)       $ (29)       $   (35)     $  (45)

Allocation of net loss:
  General Partner - NHP                $   --        $  --        $    --      $   --
  Original Limited Partner --
  1133 Fifteenth Street Three
  Associates                               --           --             --          --
Other Limited Partners                    (18)         (29)           (35)        (45)

                                       $ (18)        $ (29)       $   (35)     $  (45)
Net loss per other limited
  partnership interest                $ (1.57)      $(2.52)       $ (3.05)     $(3.92)


                   See Accompanying Notes to Financial Statements
</TABLE>


<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 Three    Limited
                                     (NHP)       Associates    Partners      Total

(Deficit) equity at
<S>                                  <C>           <C>           <C>         <C>
   December 31, 2000                 $ (93)        $ (97)        $ 449       $ 259

Net loss for the six months
   ended June 30, 2001                  --             --          (35)        (35)

(Deficit) equity at
   June 30, 2001                     $ (93)        $ (97)        $ 414       $ 224

Percentage interest at
   June 30, 2001                         1%            1%           98%        100%
                                        (A)           (B)           (C)


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists of 11,480 investment units

                   See Accompanying Notes to Financial Statements
</TABLE>


<PAGE>




d)

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


<TABLE>
<CAPTION>

                                                                  Six Months Ended
                                                                       June 30,
                                                                  2001        2000
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>         <C>
   Interest received                                              $  13        $ 12
   Operating expenses paid                                          (70)        (53)
   Net cash used in operating activities                            (57)        (41)

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

NET DECREASE IN CASH AND CASH EQUIVALENTS                          (197)        (41)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      468         540

CASH AND CASH EQUIVALENTS, END OF PERIOD                          $ 271        $ 499

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
   ACTIVITIES:
     Net loss                                                     $ (35)       $ (45)

     Adjustments to reconcile net loss to net cash used in
      operating activities:
      Increase in administrative and reporting fees
        payable                                                       7           25
      Decrease in accrued expenses                                  (29)         (21)

          Total adjustments                                         (22)           4

     Net cash used in operating activities                       $  (57)       $ (41)


                   See Accompanying Notes to Financial Statements

</TABLE>

<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"). 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.

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, 2000.


<PAGE>

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

At June 30, 2001, 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  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 this operating limited partnership is 98.01%.

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 Partnership's 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
$19,000 of its allocated share of profits and $115,000 of its allocated share of
losses from two and nine Local Limited  Partnerships during the six months ended
June 30, 2001 and 2000,  respectively.  As of June 30, 2001, the Partnership had
not  recognized  approximately  $5,740,000 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 June 30,  2001.  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 and at June 30, 2001 is approximately $35,000.

During the six months  ended June 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 six months  ended June 30,  2001.  During the six months ended June 30, 2000
the General Partner  advanced  approximately  $5,000 to one of the Local Limited
Partnerships to fund partnership  entity  expenses.  During the six months ended
June 30, 2001, the Local Limited Partnership repaid the General Partner for this
advance.  The  balance  owed  to  the  General  Partner  by  the  Local  Limited
Partnerships at June 30, 2001 is approximately  $81,000.  Interest is charged at
prime plus 2% or 8.75% at June 30, 2001.

The following are combined statements of operations for the three and six months
ended June 30, 2001 and 2000, respectively, of the Local Limited Partnerships in
which the Partnership has invested.

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                      Three Months Ended          Six Months Ended
                                           June 30,                   June 30,
                                      2001          2000         2001         2000
                                        (in thousands)             (in thousands)

<S>                                  <C>           <C>           <C>        <C>
Rental income                        $  474         $ 465         $ 935      $1,138
Other income                             22            14            41          30
   Total income                         496           479           976       1,168

Operating expenses                      267           280           535         765
Interest, taxes, and insurance          151           115           281         383
Depreciation                             70            62           141         137
   Total expense                        488           457           957       1,285

Net income (loss)                     $   8         $  22         $  19      $ (117)

National Housing Partnership
  Realty Fund III share of
  income (losses)                     $   8         $  22         $  19      $ (115)
</TABLE>

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the six month  periods  ended  June 30,  2001 and 2000,  the  Partnership
accrued  administrative  and reporting fees to the General Partner in the amount
of approximately $7,000 and $27,000,  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 $181,000 at June 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)   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.


<PAGE>



(5)   LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  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  investigations and do not believe that the investigations will
result in a material adverse impact on their  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 to 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 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 insured 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  the  remaining  Limited
Partnerships.  During  the year  ended  December  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  were allocated to the  Partnership's
investors  without   receiving  any  distributable   cash  during  the  year  of
foreclosure. The specific impact of the tax consequences was dependent upon each
specific partner's individual tax situation.  Regarding Meadowood Townhouses III
and Edmond Estates Limited  Partnership,  interest continues to be accrued under
the  original  terms of the note  agreements.  The notes are in default  and the
Limited  Partnerships  interest is subject to  foreclosure.  The  properties are
currently  being  marketed  for sale,  but there  can be no  assurance  that the
properties  will  sell or,  if they are sold,  that the sale  transactions  will
generate  sufficient  proceeds to pay the accrued  interest and principal of the
notes.  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  decreased to
approximately  $271,000 at June 30, 2001, as compared to approximately  $468,000
at December 31, 2000. The decrease was due to the payment of  withholding  taxes
to the  taxing  authorities  paid on behalf  of the  limited  investors  and 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.

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 below, 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 June 30,  2001.  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 and at June 30, 2001 is approximately $35,000.

During the six months  ended June 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 six months  ended June 30,  2001.  During the six months ended June 30, 2000
the General Partner  advanced  approximately  $5,000 to one of the Local Limited
Partnerships to fund partnership  entity  expenses.  During the six months ended
June 30, 2001, the Local Limited Partnership repaid the General Partner for this
advance.  The  balance  owed  to  the  General  Partner  by  the  Local  Limited
Partnerships at June 30, 2001 is approximately  $81,000.  Interest is charged at
prime plus 2% or 8.75% at June 30, 2001.

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  June  30,  2001,
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 six months ended June 30, 2001 and 2000. 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.

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  $18,000  and $35,000 for the
three  and  six  months  ended  June  30,  2001,  compared  to  a  net  loss  of
approximately  $29,000 and  $45,000 for the three and six months  ended June 30,
2000. The decrease in net loss for the three and six months ended June 30, 2001,
was due to a  decrease  in  administrative  and  reporting  fees to the  General
Partner partially offset by an increase in operating  expenses for the six month
period. The Partnership did not recognize approximately $19,000 of its allocated
share of profits from the Local  Limited  Partnerships  for the six months ended
June 30, 2001, as the Partnership's net carrying basis in these Partnerships had
been  previously  reduced to zero, and as of June 30, 2001, the  Partnership had
not  recognized  approximately  $5,740,000 of its allocated  share of cumulative
losses from the two Local Limited Partnerships.


<PAGE>


                           PART II - OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  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  investigations and do not believe that the investigations will
result in a material adverse impact on their  operations.  However,  as with any
similar  investigation,  there can be no assurance that these will not result in
material fines, penalties or other costs.



<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  None.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended June 30, 2001.


<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: August 13, 2001