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

                                   FORM 10-QSB

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

                 For the Quarterly Period Ended August 31, 1997

                     FEDERAL AFFORDABLE HOUSING CORPORATION
                     --------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

          Minnesota                                    59-3169033
          ---------                                    ----------
  (state or other Jurisdiction                        (IRS Employer
of incorporation or organization)                   Identification No.)

1616 Gulf-to-Bay Boulevard Clearwater, Florida                  34615
----------------------------------------------                  -----
 (Address of principal executive offices)                     (Zip Code)


         Registrant's telephone number, including area code: (727) 446-7981

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 [ ] No [ X ]

As of August 31, 1997, there were 164,500 shares of Common Stock outstanding and
7,450 Investor's Stock Purchase Warrants outstanding.

Transitional Small Business Disclosure Format: Yes [X]  No [  ]

INFORMATION REQUIRED IN QUARTERLY REPORT OF TRANSITIONAL SMALL BUSINESS ISSUERS.

                                     PART I.

                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The information required by Item 310(b) of Regulation S-B is attached.

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

[The  Registrant  is a  transitional  small  business  issuer  which relied upon
Alternative 2 under "Information Required in Annual Report of Transitional Small
Business  Issuers" in its most recent 10-KSB,  and accordingly,  chooses here to
update the response to Item 6(a) (3) (i) to Model B of Form 1-A. ]

The  Company  completed  its public  offering on June 6, 1995 and  received  net
proceeds of $359,336.

The Company's plan of operation for the 12 month period ended May 31, 1998 calls
for continued development of infrastructure scaled according to the net proceeds
of its offering and aggressive  marketing.  Management believes that the balance
remaining of its net proceeds of $359,336  from its  offering is  sufficient  to
carry out its plan of  operation  for the twelve  months  through May 31,  1998,
without revenues from operations.

                                       1
<PAGE>

The Company  anticipates  that its major expense  during the twelve month period
ending May 31,  1998 will be  infrastructure  development.  Upon  completion  of
infrastructure development,  the company anticipates that its only expenses will
be  executive  compensation,  real  estate  taxes,  general  corporate  purposes
(including  marketing  and  sales)  and  perhaps  model  home  construction.  In
addition,  the  Company  plans to limit  additional  property  acquisitions  and
infrastructure  development  until  purchase  agreements  have been executed for
approximately  half of the developed lots. The Company believes that its plan of
scaled infrastructure  development and limitation on acquisition and development
will enable it to operate with the net proceeds of its public offering,  without
revenues from operations, for the twelve month period ending May 31, 1998.

The Company anticipates that it will hire additional  commissioned sales persons
prior to June, 1998. However, such sales persons will be paid only on a straight
commission  basis and will be entitled to payment only upon revenue  generation.
Accordingly,  the Company  does not expect that hiring such  commissioned  sales
persons  will have a  significant  impact on the  Company's  ability  to operate
without revenues from operations.

The company does not intend to conduct any product research or development or to
purchase or sell any plant or equipment prior to June, 1998.

Information  concerning the comparable  interim period for the preceding year is
not included.


                                    PART II.

ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 2. CHANGES IN SECURITIES

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Not Applicable.

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits. See the Indexes to Exhibits, below.

        (b)    Reports on Form 8-K.  Not Applicable.

INDEX TO EXHIBITS.

All of the  items  below  are  incorporated  by  reference  to the  Registrant's
Registration  Statement on Form SB-2, File No.  33-67536-A,  effective March 10,
1995, except for Item 27.1, which is included with this filing.

Number                         Description

4.1                     Form of Common Stock Certificate
                          (Exhibit 4.A of Form SB-2)

4.2                     Form of Investor's Stock Purchase Warrant Certificate
                          (Exhibit 4.B of Form SB-2)

                                       2
<PAGE>

10.1                    Option Agreement between Registrant, RemProp, Inc. and
                        Key Management, Inc.
                          (Exhibit 10.A. of Form SB-2)

10.2                    First Amendment to Option Agreement
                          (Exhibit 10.B. to Form SB-2)

10.3                    Second Amendment to Option Agreement
                          (Exhibit 10.C. to Form SB-2)

10.4                    Lease Agreement between Registrant and RemProp, Inc.
                          (Exhibit 10.D. to Form SB-2)

27.1                    Financial Data Schedule*

99.1                    Registrant's Registration Statement on Form SB-2, as
                        amended.

99.2                    Registrant's  Final  Prospectus,  dated March 10,  1995,
                        filed under Rule 424(b) of the 1933 Act.

* Included with this report.  All other items are  incorporated  by reference to
the Registrant's Form SB-2, File No. 33-67536-A, effective March 10, 1995.

                                   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.

                     FEDERAL AFFORDABLE HOUSING CORPORATION


Date: December 15, 1997

                                          By:     /s/ Richard E. Metz
                                          ------------------------------------
                                          Richard E. Metz, President, CEO



                                          By:     /s/ Wayne A. Weyrauch
                                          ------------------------------------
                                          Wayne A. Weyrauch
                                          Vice President of Finance, CFO
                                          (Principal Financial officer,
                                           Principal Accounting officer)


                                       3
<PAGE>


                     FEDERAL AFFORDABLE HOUSING CORPORATION



                                TABLE OF CONTENTS


                                                                          PAGE

                                                                         -------

ACCOUNTANT'S REPORT PAGE                                                    5

BALANCE SHEETS                                                              6

STATEMENTS OF OPERATIONS                                                    7

STATEMENTS OF CASH FLOWS                                                    8


                                       4
<PAGE>


                          J. MICHAEL DAILY & ASSOCIATES
                          Certified Public Accountants
                            1822 Drew Street, Suite 1
                            Clearwater, Florida 34625
                                  727-447-6860
                                Fax 727-441-1840



                                                                         Members
                                                              American Institute
                                                             of Certified Public
                                                                     Accountants

                                                               Florida Institute
                                                             of Certified Public
                                                                     Accountants

                                January 16, 1998



Board of Directors
Federal Affordable Housing Corporation
1616 Gulf-to-Bay Blvd.
Clearwater, Florida 34615

Gentlemen:

We have compiled the accompanying balance sheet of FEDERAL AFFORDABLE HOUSING as
of August 31, 1997,  and the related  statement of revenues and expenses for the
three months then ended,  and the comparative  statement of income for the three
months ended August 31, 1997 and 1996,  and the  statement of cash flows for the
three  months  then  ended  in  accordance  with  Statements  on  Standards  for
Accounting  and Review  services  issued by the American  Institute of Certified
Public Accountants.

A  compilation  is limited to  presenting  in the form of  financial  statements
information  that is the  representation  of management.  We have not audited or
reviewed the accompanying financial statements and, accordingly,  do not express
an opinion or any other form of assurance on them.

Management has elected to omit substantially all of the disclosures  required by
generally accepted  accounting  principles.  If the disclosures were included in
the financial statements,  they might influence the user's conclusions about the
Company's financial position, results of operations and cash flows. Accordingly,
these financial statements are not designed for those who are not informed about
such matters.



/s/ J. Michael Daily
-------------------------------
J. Michael Daily, CPA

Clearwater, Florida
January 16,1998

                                       5
<PAGE>


                     FEDERAL AFFORDABLE HOUSING CORPORATION

                                 Balance Sheets


                                     Assets

<TABLE>
<CAPTION>
                                                                                     August 31,            May 31,
                                                                                        1997                1997
                                                                                  ------------------  ------------------


<S>                                                                            <C>                  <C>
Current assets
   Operating cash in bank                                                         $           1,449   $           3,845
   Certificate of deposit, Suntrust                                                         300,000             300,000
   Due from Suncoast Food Services, Inc.                                                     67,271              67,271
   Construction in process:
     Land costs/site development                                                            237,964             237,964
     Houses                                                                                 146,604             146,604
                                                                                  ------------------  ------------------

         Total current assets                                                               753,288             755,684
                                                                                  ------------------  ------------------

Other assets
   Incorporation fees, legal expenses and registration
   statement costs - unamortized                                                             51,390              51,390
   Utility deposits                                                                             424                 424
                                                                                  ------------------  ------------------
                                                                                             51,814              51,814
                                                                                  ------------------  ------------------


         Total assets                                                                       805,102             807,498
                                                                                  ==================  ==================


                      Liabilities and Stockholders' Equity

Current liabilities
   Due to RemProp, Inc.                                                                      19,509              19,509
   Commercial loan payable, SunTrust                                                        281,895             281,074
   Construction Loans, SunTrust houses                                                       95,400              95,400
   Note payable, R. Metz, demand, bearing interest at 7%                                      8,931               8,931
                                                                                  ------------------  ------------------

         Total current liabilities                                                          405,735             404,914
                                                                                  ------------------  ------------------


Stockholders' equity
   Common stock, no par value
     Authorized 5,000,000 shares,
     164,500 issued and outstanding                                                         486,887             486,887
   Accumulated deficit                                                                      (87,521)            (84,303)
                                                                                  ------------------  ------------------

         Total stockholders' equity                                                         399,367             402,584
                                                                                  ------------------  ------------------


         Total liabilities and stockholders' equity                               $         805,102   $         807,498
                                                                                  ==================  ==================

</TABLE>

                                       6
<PAGE>

                     FEDERAL AFFORDABLE HOUSING CORPORATION

                            Statements of Operations


<TABLE>
<CAPTION>

                                                                             For the Three Months Ended
                                                                                     August 31,
                                                                         -----------------------------------             
                                                                              1997                 1996
                                                                         ---------------       ------------- 

<S>                                                                   <C>                   <C>    
Income
     Interest Earned                                                   $              -      $            -

Selling, general and administrative
     expenses                                                                     3,218               8,825
                                                                         ---------------       ------------- 

                  Net loss                                             $         (3,218)     $       (8,825)
                                                                         ===============       =============


Basic loss per common share                                            $          (0.02)     $        (0.05)
                                                                         ===============       =============                 

Weighted average number of
     common shares outstanding                                                  164,500             164,500
                                                                         ===============       =============
</TABLE>
                                                                         

                                       7
<PAGE>

                     FEDERAL AFFORDABLE HOUSING CORPORATION

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                 For the Three Months Ended
                                                                                          August 31,
                                                                              ----------------------------------
                                                                                   1997               1996
                                                                              ---------------    ---------------            

<S>                                                                          <C>                <C> 
Cash flows from operating activities:
   Reconciliation of net loss to net cash
     used in operating activities
       Net loss                                                               $       (3,218)    $       (8,825)
       Adjustments to reconcile net loss to net
         cash used in operating activities
         Amortization of fees and costs
       Changes in assets and liabilities
         Net decrease in intercompany loans,
         Construction in process, fees
         and costs, and deposits                                                                        (41,086)
                                                                              ---------------    ---------------
                                                                                      (3,218)           (49,911) 
                                                                              ---------------    ---------------

Cash flows from investing activities
   Addition to certificate of deposit                                                      -                  -
                                                                              ---------------    ---------------
               Net cash used in investing activities                                       -                  -
                                                                              ---------------    ---------------
Cash flows from financing activities
   Proceeds from issuance of common stock                                                  -                  -
   Proceeds from issuance of notes payable                                               821             50,000
                                                                              ---------------    ---------------                    
               Net cash provided by financing activities                                 821             50,000
                                                                              ---------------    ---------------

               Net increase (decrease) in cash                                        (2,396)                89

Cash beginning                                                                         3,845              1,219
                                                                              ---------------    ---------------
Cash ending                                                                   $        1,449     $        1,308
                                                                              ===============    ===============

</TABLE>

                                       8