UNITES 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, 2004


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


             For the transition period from _________to _________

                         Commission file number 0-14457


                 NATIONAL  HOUSING  PARTNERSHIP  REALTY  FUND III
 (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  Exchange  Act during the past 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 ___


                See Accompanying Notes to Financial Statements

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS


                 NATIONAL HOUSING PARTNERSHIP REALTY FUND III

                     Statement of Net Assets in Liquidation
                                   (Unaudited)
                                 (in thousands)

                               September 30, 2004


ASSETS
   Cash and cash equivalents                                          $ 126
   Accounts receivable                                                   12
                                                                             138
LIABILITIES
   Accrued liabilities                                                   19
   Estimated costs during the period of liquidation                      19
                                                                              38

NET ASSETS IN LIQUIDATION                                             $ 100


<PAGE>



                 NATIONAL HOUSING PARTNERSHIP REALTY FUND III

              Statement of Changes in Net Assets in Liquidation
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>


                                                              For the Three Months
                                                               Ended September 30,
                                                                            2004
<S>                                                                   <C>
Net assets in liquidation at beginning of period                      $ 73

Changes in net assets in liquidation attributed to:
   Decrease in cash and cash equivalents                                  (1)
   Decrease in accrued liabilities                                         5
   Decrease in estimated costs during the period of
     liquidation                                                          23
Net assets in liquidation at end of period                            $ 100

</TABLE>



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



                                        Six Months Ended   Three and Nine Months
                                            June 30,        Ended September 30,
                                              2004                  2003
Revenues:
  Equity income from investment
   in Local Limited Partnership            $    --           $    --     $   132
  Interest income                               --                --           1
                                                --                --         133
costs and expenses:
  Equity loss from investment
    in Local Limited Partnership                 --                1          --
  Administrative and reporting
    fees to General Partner                       3                2           4
  Other operating expenses                       30               23          47
                                                 33               26          51

Net (loss) income                           $   (33)         $   (26)    $    82

Allocation of net (loss) income:
  General Partner - NHP                     $    --          $    --     $     1
  Original Limited Partner --
  1133 Fifteenth Street Three
  Associates                                     --               --           1
  Other Limited Partners                        (33)             (26)         80

                                            $   (33)         $   (26)    $    82
Net (loss) income per other
  limited partnership interest              $ (2.95)         $ (2.31)    $  7.11


<PAGE>



                 NATIONAL  HOUSING  PARTNERSHIP  REALTY  FUND III
       Statement of Changes in Partners' (Deficiency) Equity/Net Assets in
                                   Liquidation
                                   (Unaudited)
                        (in thousands, except unit data)

<TABLE>
<CAPTION>


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

(Deficiency) equity at
<S>         <C> <C>                  <C>           <C>           <C>         <C>
   December 31, 2003                 $ (83)        $ (87)        $ 318       $ 148

Net loss for the six months
   ended June 30, 2004                  --             --          (33)         (33)

(Deficiency) equity at
   June 30, 2004                     $ (83)        $ (87)        $ 285          115

Adjustment to liquidation
   basis (Note 4)                                                               (42)

Net assets in liquidation
   at June 30, 2004                                                           $ 73

Percentage interest at
   June 30, 2004                         1%            1%           98%        100%
                                        (A)           (B)           (C)


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists  of 11,179  investment  units at  September  30,  2004 and 11,199
      investment  units at  December  31,  2003.  During the nine  months  ended
      September 30, 2004, 20 units were abandoned (Note 6).
</TABLE>

                See Accompanying Notes to Financial Statements

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                            Statements of Cash Flows
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                            Six Months      Nine Months
                                                              Ended            Ended
                                                             June 30,      September 30,
                                                               2004             2003
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>              <C>
   Interest received                                           $ --             $ 1
   Operating expenses paid                                        (9)             (14)
   Net cash used in operating activities                          (9)             (13)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Withholding taxes paid for limited partners                   (12)              (1)
   Distributions returned to partnership                          21               --
   Net cash provided by (used in) financing activities             9               (1)

NET DECREASE IN CASH AND CASH EQUIVALENTS                         --              (14)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                   127              647

CASH AND CASH EQUIVALENTS, END OF PERIOD                      $ 127            $ 633

RECONCILIATION OF NET (LOSS) INCOME TO NET CASH
   USED IN OPERATING ACTIVITIES:
     Net (loss) income                                        $ (33)            $ 82

     Adjustments to reconcile net (loss) income to
      net cash used in operating activities:
      Equity income from investment in Local
        Limited Partnership                                       --             (132)
      Increase in administrative and reporting
        fees payable                                               3                4
      Increase in accrued expenses                                21               33

          Total adjustments                                       24              (95)

     Net cash used in operating activities                     $ (9)           $ (13)
</TABLE>

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                          Notes to Financial Statements
                                   (Unaudited)


(1)   ACCOUNTING POLICIES

Basis of Presentation

As of  June  30,  2004,  National  Housing  Partnership  Realty  Fund  III  (the
"Partnership" or "Registrant")  adopted the liquidation  basis of accounting due
to the  sale  of the  property  in  its  final  investment  in a  Local  Limited
Partnership   during  the  first  quarter  of  2004.   Upon  settlement  of  the
Partnership's remaining liabilities, the Partnership is expected to terminate.

As a result of the  decision  to  liquidate  the  Partnership,  the  Partnership
changed its basis of accounting for its financial statements at June 30, 2004 to
the liquidation  basis of accounting.  Consequently,  assets have been valued at
estimated net realizable  value and liabilities are presented at their estimated
settlement  amounts,  including estimated costs associated with carrying out the
liquidation  of  the  Partnership.  The  valuation  of  assets  and  liabilities
necessarily  requires many estimates and  assumptions  and there are substantial
uncertainties in carrying out the liquidation.  The actual realization of assets
and  settlement of liabilities  could be higher or lower than amounts  indicated
and is based upon estimates of The National  Housing  Partnership  ("NHP" or the
"General Partner") as of the date of the financial statements.

Included in  liabilities  in the  statement of net assets in  liquidation  as of
September 30, 2004 is  approximately  $19,000 of costs that the General  Partner
estimates  will be  incurred  during  the  period  of  liquidation  based on the
assumption that the liquidation  process will be completed by December 31, 2004.
Because the success in  realization  of assets and the settlement of liabilities
is based on the General Partner's best estimates,  the liquidation period may be
shorter than projected or it may be extended beyond the projected period.

Organization

The Partnership 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
owned and operated an existing  rental housing  project or had acquired  limited
partnership  interests  in  partnerships  which  owned and  operated  one or two
existing rental housing projects. All such rental housing projects were financed
and/or  operated  with  one or more  forms of  rental  assistance  or  financial
assistance from the U.S. Department of Housing and Urban Development ("HUD"). On
June 30, 1985, the Partnership began raising capital and acquiring  interests in
Local Limited Partnerships.

The General Partner, a District of Columbia limited partnership,  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, 2004, 11,179 limited partnership interests
were outstanding.

On June 3, 1997,  Apartment Investment and Management Company, a publicly traded
real estate  investment  trust ("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 Partnership.  As a result of
these transactions,  the AIMCO Group has acquired control of the general partner
of the Partnership and, therefore, may be deemed to have acquired control of the
Partnership.

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.

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

At  September  30,  2004,  the  Partnership  owned a 94.5%  limited  partnership
interest  (98% with  respect  to  allocation  of  losses)  in one Local  Limited
Partnership,  Edmond Estates Limited  Partnership.  During the nine months ended
September 30, 2004, Edmond Estates Limited  Partnership sold its only investment
property. The Partnership previously owned 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  was
98.01%.  Meadowood  Townhouses  III Limited  Partnership  terminated in December
2003.

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
$565,000  of its share of  profits  and  approximately  $36,000  of its share of
losses from one Local Limited Partnership during the nine months ended September
30, 2004 and 2003,  respectively.  With the sale of the property owned by Edmond
Estates Limited Partnership during the nine months ended September 30, 2004, the
Partnership's  share  of  profits  was not  sufficient  to  recover  losses  not
previously  recognized.  As of  September  30,  2004,  the  Partnership  had not
recognized  approximately $1,994,000 of its allocated share of cumulative losses
from Edmond Estates Limited Partnership in which its investment is zero.

With  the  sale of the  property  owned  by  Meadowood  Townhouses  III  Limited
Partnership  during 2001, 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.  During the nine months  ended  September  30,  2003,  the
Partnership  recognized  equity  income from the Local  Limited  Partnership  of
approximately  $132,000  and  increased  its  investment  in the  Local  Limited
Partnership  by the same  amount.  The increase in the  investment  in the Local
Limited  Partnership  was the result of an additional gain on sale recognized by
Meadowood  Townhouses  III  Limited  Partnership  during the nine  months  ended
September  30,  2003.  The gain on sale was the  result of accrued  legal  fees,
originally  established  based on estimates in 2001, which were determined to be
unneeded by the Local Limited Partnership in 2003.

Edmond Estates  Limited  Partnership  had a note which was executed by the Local
Limited  Partnership  with the seller as part of the acquisition of the property
by the Local Limited Partnership.  The note was nonrecourse and was subordinated
to the  mortgage  note on the  property  for as long as HUD insured the mortgage
note. Neither the Local Limited Partnership nor any partner thereof,  present or
future, assumed any personal liability for the payment of the note. The note was
due in December 1999 for Edmond Estates Limited Partnership.  Interest continued
to be accrued under the original  terms of the note  agreement.  The note was in
default and the Local Limited Partnership interest was subject to foreclosure.

On March 29, 2004, the Local Limited Partnership sold its underlying property to
a third party. The proceeds from the sale were not sufficient to pay the accrued
interest  and  principal  of the note in full.  During  the  nine  months  ended
September  30,  2004,   the  Local  Limited   Partnership   made  a  payment  of
approximately  $329,000  against  the note using  proceeds  from the sale of the
property. The remaining proceeds from the sale of approximately $274,000 will be
used to make a final  payment  on the notes and any  remaining  balance  will be
forgiven.

Advances  made  by  the  Partnership  to  the  Local  Limited  Partnership  were
considered   part  of  the   Partnership's   investment  in  the  Local  Limited
Partnership.  When advances were made, they were 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 Local Limited  Partnership had been reduced to zero at September
30,  2004.  These  advances are carried as a payable to the  Partnership  by the
Local Limited Partnership and at September 30, 2004 the balance is approximately
$31,000.  Interest is  calculated  at the JP Morgan  Chase prime rate plus 2% or
6.75% at September 30, 2004. These advances will not be repaid.

During the nine months ended  September 30, 2004, the General  Partner  advanced
approximately  $63,000  to the Local  Limited  Partnership.  There  were no such
advances during the nine months ended September 30, 2003. During the nine months
ended September 30, 2004, the Local Limited  Partnership repaid the advances and
accrued interest totaling approximately $141,000 using proceeds from the sale of
its investment property.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting  for  the  Impairment  or  Disposal  of  Long-Lived   Assets",   the
accompanying  combined  statement  of  operations  for the three and nine months
ended  September 30, 2003 have been restated to reflect the operations of Edmond
Estates Limited Partnership as loss from discontinued operations due to its sale
in March 2004. In addition,  the operations of Meadowood III Limited Partnership
are shown as loss from discontinued operations due to its sale in 2001.

The  following are combined  statements of operations  for the nine months ended
September 30, 2004 and 2003, 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,
                                      2004          2003         2004         2003
                                        (in thousands)             (in thousands)
                                                 (Restated) (Restated)

Loss from discontinued
<S>                                  <C>           <C>          <C>          <C>
 operations                          $ (22)        $ (14)       $ (127)      $ (37)
Gain on sale of
 discontinued operations                 27            --           704         135
Net income (loss)                     $ 5          $ (14)        $ 577        $ 98
National Housing Partnership
  Realty Fund III share of
   (loss) income                      $ 5          $ (14)        $ 565        $ 96
</TABLE>

(3)   TRANSACTIONS WITH AFFILIATED PARTIES

During the nine  months  ended  September  30,  2004 and 2003,  the  Partnership
accrued  administrative  and reporting fees to the General Partner in the amount
of  approximately   $4,000  for  services  provided  to  the  Partnership.   The
Partnership  did not make a payment to the General Partner for these fees during
the nine months ended September 30, 2004 and 2003, respectively.  The amount due
to the General Partner by the Partnership for  administrative and reporting fees
was approximately $4,000 at September 30, 2004.

(4)   Adjustment to Liquidation Basis of Accounting

At June 30, 2004, in accordance with the liquidation basis of accounting, assets
were  adjusted to their  estimated net  realizable  value and  liabilities  were
adjusted to their estimated  settlement amount.  The net adjustment  required to
convert to the liquidation  basis of accounting was an increase in net assets of
approximately $42,000 which is included in the Statement of Changes in Partners'
(Deficiency) Equity/Net Assets in Liquidation.

(5)   CONTINGENCIES

The  Partnership  is unaware of any pending or  outstanding  litigation  matters
involving it or its investments  that are not of a routine nature arising in the
ordinary course of business.

As  previously  disclosed,  the  Central  Regional  Office of the United  States
Securities  and  Exchange   Commission   (the  "SEC")  is  conducting  a  formal
investigation relating to certain matters.  Although the staff of the SEC is not
limited  in the  areas  that it may  investigate,  AIMCO  believes  the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003,  forecasted  guidance,  accounts payable,  rent concessions,
vendor  rebates,  capitalization  of payroll and certain  other  costs,  and tax
credit  transactions.  AIMCO is cooperating  fully. AIMCO is not able to predict
when the matter  will be  resolved.  AIMCO does not  believe  that the  ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition  or results of  operations.  Similarly,  the General  Partner does not
believe that the ultimate  outcome  will have a material  adverse  effect on the
Partnership's financial condition or results of operations.

(6)   ABANDONMENT OF LIMITED PARTNERSHIP UNITS

During  the nine  months  ended  September  30,  2004,  the  number  of  Limited
Partnership Units decreased by 20 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
abandonment.  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.


<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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.  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;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   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.

As of  June  30,  2004,  National  Housing  Partnership  Realty  Fund  III  (the
"Partnership" or "Registrant")  adopted the liquidation  basis of accounting due
to the  sale  of the  property  in  its  final  investment  in a  Local  Limited
Partnership   during  the  first  quarter  of  2004.   Upon  settlement  of  the
Partnership's remaining liabilities, the Partnership is expected to terminate.

As a result of the  decision  to  liquidate  the  Partnership,  the  Partnership
changed its basis of accounting for its financial statements at June 30, 2004 to
the liquidation  basis of accounting.  Consequently,  assets have been valued at
estimated net realizable  value and liabilities are presented at their estimated
settlement  amounts,  including estimated costs associated with carrying out the
liquidation  of  the  Partnership.  The  valuation  of  assets  and  liabilities
necessarily  requires many estimates and  assumptions  and there are substantial
uncertainties in carrying out the liquidation.  The actual realization of assets
and  settlement of liabilities  could be higher or lower than amounts  indicated
and is  based  upon  estimates  of the  General  Partner  as of the  date of the
financial statements.

Included in  liabilities  in the  statement of net assets in  liquidation  as of
September 30, 2004 is  approximately  $19,000 of costs that the General  Partner
estimates  will be  incurred  during  the  period  of  liquidation  based on the
assumption that the liquidation  process will be completed by December 31, 2004.
Because the success in  realization  of assets and the settlement of liabilities
is based on the General Partner's best estimates,  the liquidation period may be
shorter than projected or it may be extended beyond the projected period.

During the three months ended  September  30,  2004,  net assets in  liquidation
decreased by approximately $27,000, primarily due to a decrease in the estimated
costs  during the period of  liquidation.  Estimated  costs during the period of
liquidation  decreased  due to a decrease  in the  estimated  cost of the annual
audit.

LIQUIDITY AND CAPITAL RESOURCES

Edmond Estates  Limited  Partnership  had a note which was executed by the Local
Limited  Partnership  with the seller as part of the acquisition of the property
by the Local Limited Partnership.  The note was nonrecourse and was subordinated
to the  mortgage  note on the  property  for as long as HUD insured the mortgage
note.  Any payments due from project  income were payable from surplus  cash, as
defined by the HUD Regulatory  Agreement.  Neither the Local Limited Partnership
nor any partner thereof,  present or future,  assumed any personal liability for
the payment of the note. The note was due in December 1999.  Interest  continued
to be accrued under the original  terms of the note  agreement.  The note was in
default and the Local Limited Partnership interest was subject to foreclosure.

On March 29, 2004, the Local Limited Partnership sold its underlying property to
a third party. The proceeds from the sale were not sufficient to pay the accrued
interest  and  principal  of the note in full.  During  the  nine  months  ended
September  30,  2004,   the  Local  Limited   Partnership   made  a  payment  of
approximately  $329,000  against  the note using  proceeds  from the sale of the
property. The remaining proceeds from the sale of approximately $274,000 will be
used to make a final  payment  on the notes and any  remaining  balance  will be
forgiven.

The  Partnership's  liquidity  based  on  cash  and  cash  equivalents  remained
relatively constant at approximately  $126,000 at September 30, 2004 compared to
approximately  $127,000 at December 31, 2003. The Partnership  received a return
of an over  distribution  during the prior year to the  general  partners of the
Partnership  which was offset by non resident  withholding paid for the partners
and the  payment of  operating  expenses.  The  Partnership's  existing  cash is
expected  to  adequately  fund the  operations  of the  Partnership  during  the
liquidation period.

Advances  made  by  the  Partnership  to  the  Local  Limited  Partnership  were
considered   part  of  the   Partnership's   investment  in  the  Local  Limited
Partnership.  When advances were made, they were 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 Local Limited  Partnership had been reduced to zero at September
30,  2004.  These  advances are carried as a payable to the  Partnership  by the
Local Limited Partnership and at September 30, 2004 the balance is approximately
$31,000.  Interest is  calculated  at the JP Morgan  Chase prime rate plus 2% or
6.75% at September 30, 2004. These advances will not be repaid.

During the nine months ended  September 30, 2004, the General  Partner  advanced
approximately  $63,000  to the Local  Limited  Partnership.  There  were no such
advances during the nine months ended September 30, 2003. During the nine months
ended September 30, 2004, the Local Limited  Partnership repaid the advances and
accrued interest totaling approximately $141,000 using proceeds from the sale of
its investment property.

Distributions   received  from  the  Local  Limited  Partnership  represent  the
Partnership's  proportionate share of the excess cash available for distribution
from the Local Limited Partnership.  As a result of the use of the equity method
of accounting for the  Partnership's  investment,  as of September 30, 2004, the
investment in the 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.

The property in which the Local  Limited  Partnership  invested  received 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  was  generally  restricted  by these
government  assistance  programs.  The Local Limited  Partnership  sold its only
investment property on March 29, 2004.


RESULTS OF OPERATIONS

The Partnership  retains an investment as a limited partner in one Local Limited
Partnership that operated 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 Partnership. 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 Partnership has been reduced to zero, the Partnership's share of
the  operations of the Local Limited  Partnership  is no longer being  recorded.
With the sale of the property owned by Edmond Estates Limited Partnership during
the nine months ended September 30, 2004, the Partnership's share of profits was
not sufficient to recover losses not previously recognized.

With  the  sale of the  property  owned  by  Meadowood  Townhouses  III  Limited
Partnership  during 2001, 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.  During the nine months  ended  September  30,  2003,  the
Partnership  recognized  equity  income from the Local  Limited  Partnership  of
approximately  $132,000  and  increased  its  investment  in the  Local  Limited
Partnership  by the same  amount.  The increase in the  investment  in the Local
Limited  Partnership  was the result of an additional gain on sale recognized by
Meadowood  Townhouses  III  Limited  Partnership  during the nine  months  ended
September  30,  2003.  The gain on sale was the  result of accrued  legal  fees,
originally  established  based on estimates in 2001, which were determined to be
unneeded by the Local Limited Partnership in 2003.

The Partnership did not recognize approximately $565,000 of its share of profits
and  approximately  $36,000  of its  share  of  losses  from one  Local  Limited
Partnership for the nine months ended September 30, 2004 and 2003, respectively.
At  September  30,  2004,  the  Partnership  had  not  recognized  approximately
$1,994,000 of its allocated share of cumulative losses from Edmond Estates Local
Limited Partnership in which its investment is zero.

ITEM 3.     CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of 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,  has evaluated
the  effectiveness of the Partnership's  disclosure  controls and procedures (as
such term is defined  in Rules  13a-15(e)  and  15d-15(e)  under the  Securities
Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) as of the end of the
period covered by this report. Based on such evaluation, 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  concluded  that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fiscal quarter to which this report relates that have  materially  affected,  or
are reasonably likely to materially affect,  the Partnership's  internal control
over financial reporting.


<PAGE>


                           PART II - OTHER INFORMATION


ITEM 6.     EXHIBITS

            See Exhibit Index Attached.


<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

                                    By:   The National Housing Partnership,
                                          Its sole General Partner


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

                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          President and Chief  Executive
                                          Officer

                                    By:   /s/Stephen B. Waters
                                          Stephen B. Waters
                                          Vice President


                                    Date: November 15, 2004


<PAGE>


                                  Exhibit Index


      31.1  Certification  of equivalent of Chief Executive  Officer pursuant to
            Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),   as  Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      31.2  Certification  of equivalent of Chief Financial  Officer pursuant to
            Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),   as  Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      32.1  Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



<PAGE>



Exhibit 31.1
                                  CERTIFICATION

I, David R. Robertson, 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 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
      report;

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

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and


      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.


Date: November 15, 2004

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President and Chief  Executive  Officer of
                                    National     Corporation    for    Housing
                                    Partnerships,   equivalent  of  the  chief
                                    executive officer of the Partnership


<PAGE>


Exhibit 31.2
                                  CERTIFICATION

I, Stephen B. Waters, 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 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
      report;

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

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date: November 15, 2004

                                    /s/Stephen B. Waters
                                    Stephen B. Waters
                                    Vice  President  of  National  Corporation
                                    for Housing  Partnerships,  equivalent  of
                                    the  chief   financial   officer   of  the
                                   Partnership


<PAGE>



                                       19
Exhibit 32.1


                          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, 2004 as filed with the Securities and Exchange Commission on the date hereof
(the  "Report"),  David R.  Robertson,  as the equivalent of the chief executive
officer of the  Partnership,  and Stephen B. Waters,  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/David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  November 15, 2004


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  November 15, 2004


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