February 13, 1998




Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312

Re:     Boston Financial Qualified Housing Tax Credits L.P.  III
        Report on Form 10-Q for Quarter Ended December 31, 1997
        File No. 01-18462




Gentlemen:

Pursuant to the requirements of Section 15(d) of the Securities  Exchange Act of
1934, filed herewith is one copy of subject report.


Very truly yours,


/s/George Fondulis
George Fondulis
Assistant Controller





QH3-Q3.DOC



 <PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 
1934

(Mark One)

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

For the quarterly period ended December 31, 1997

                                       OR

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


For the transition period from           to


For Quarter Ended  December 31, 1997     Commission file number       01-18462
                  --------------------                          ---------------

 Boston Financial Qualified Housing Tax Credits L.P. III
(Exact name of registrant as specified in its charter)


 Delaware                                              04-3032106
      (State or other jurisdiction of      (I.R.S. Employer Identification No.)
       incorporation or organization)


   101 Arch Street, Boston, Massachusett                         02110-1106
    (Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code (617)439-3911

        Indicate by check mark whether the  registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .


 <PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

                                TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION                                         Page No.
------------------------------                                         --------

Item 1.  Combined Financial Statements

         Combined Balance Sheets - December 31, 1997 (Unaudited)
           and March 31, 1997                                                1

         Combined Statements of Operations (Unaudited) - For the Three and Nine
           Months Ended December 31, 1997 and 1996                           2

         Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Nine Months Ended December 31, 1997         3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Nine Months Ended December 31, 1997 and 1996                      4

         Notes to the Combined Financial Statements (Unaudited)              5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                              11

PART II - OTHER INFORMATION

Items 1-6                                                                   14

SIGNATURE                                                                   15



 <PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                                                        
         COMBINED BALANCE SHEETS - December 31, 1997 and March 31, 1997
 <TABLE>
 <CAPTION>

                                                                    December 31,              March 31,
                                                                        1997                    1997
                                                                      (Unaudited)
 <S>                                                                 <C>                    <C>  
 
Assets

Cash and cash equivalents                                            $    156,413           $    379,614
Marketable securities, at fair value                                      288,358                331,319
Investments in Local Limited Partnerships, net of reserve
   for valuation of $1,635,000 (Note 1)                                21,449,235             23,983,675
Accounts receivable, net of allowance for bad
   debt of $292,860 and $46,702, respectively                             105,700                175,669
Interest receivable                                                         4,268                 17,607
Prepaid expenses                                                           22,035                 40,019
Tenant security deposits                                                   67,861                 66,439
Replacement reserves                                                      166,567                210,045
Rental property at cost, net of accumulated
   depreciation and reserve for valuation of $5,591,877
   and $7,175,143, respectively                                        15,484,934             17,884,234
Deferred acquisition fees escrow                                          225,000                337,500
Deferred expenses, net of $130,697 and $111,038
   of accumulated amortization, respectively                              215,680                235,339
Other assets                                                              267,888                130,130
                                                                     ------------           ------------
     Total Assets                                                    $ 38,453,939           $ 43,791,590
                                                                     ============           ============

Liabilities and Partners' Equity

Accounts payable to affiliates                                       $  1,494,772           $  1,193,182
Accounts payable and accrued expenses                                     710,205                611,515
Interest payable                                                          283,261                377,295
Note payable, affiliate                                                   514,968                514,968
Security deposits payable                                                  69,279                 82,054
Due to affiliate                                                          323,046                323,046
Deferred acquisition fees payable                                         225,000                337,500
General Partner advances                                                  200,000                200,000
Mortgage notes payable                                                  8,677,248             11,754,415
                                                                     ------------           ------------
     Total Liabilities                                                 12,497,779             15,393,975
                                                                     ------------           ------------

Minority interest in Local Limited Partnerships                           914,695              1,053,122
                                                                     ------------           ------------

General, Initial and Investor Limited Partners' Equity                 25,040,812             27,346,440
Net unrealized gains (losses) on marketable securities                        653                 (1,947)
                                                                     ------------           ------------
     Total Partners' Equity                                            25,041,465             27,344,493
                                                                     ------------           ------------
     Total Liabilities and Partners' Equity                          $ 38,453,939           $ 43,791,590
                                                                     ============           ============

 </TABLE>
 The  accompanying  notes are an integral part of these  combined
 financial statements.


 <PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)
           For the Three and Nine Months Ended December 31, 1997 and 1996
 <TABLE>
 <CAPTION>

                                                        Three Months Ended                  Nine Months Ended
                                                  December 31,      December 31,      December 31,     December 31,
                                                      1997              1996              1997             1996
                                                 --------------   ---------------   --------------     --------
 <S>                                              <C>              <C>               <C>               <C>   

Revenue:
   Rental                                         $    619,190     $     436,089     $  1,868,953      $  1,321,350
   Investment                                           10,176             4,401           31,451            71,763
   Other                                                34,287            24,568          193,661           152,507
                                                  ------------     -------------     ------------      ------------
     Total Revenue                                     663,653           465,058        2,094,065         1,545,620
                                                  ------------     -------------     ------------      ------------

Expenses:
   Asset management fees, related party                109,095           113,861          327,285           341,583
   General and administrative (includes
     reimbursements to affiliates of $135,989
     and $115,671 in 1997 and 1996, respectively) 138,783          122,737           380,417           319,052
   Bad debt                                            690,469                 -          754,636                 -
   Rental operations, exclusive of depreciation        409,452           255,111        1,263,861           859,606
   Property management fees                             43,797            33,524          131,987           102,545
   Interest                                            212,401           122,584          677,102           571,293
   Depreciation                                        200,925           125,083          596,022           375,255
   Amortization                                         40,751            44,420          133,348           133,264
                                                  ------------     -------------     ------------      ------------
     Total Expenses                                  1,845,673           817,320        4,264,658         2,702,598
                                                  ------------     -------------     ------------      ------------

Loss before equity in losses of Local Limited  Partnerships,  minority interest,
   loss on liquidation of interests in Local Limited Partnerships and
   extraordinary items                              (1,182,020)         (352,262)      (2,170,593)       (1,156,978)

Equity in losses of Local Limited Partnerships        (838,977)         (727,754)      (2,130,935)       (2,625,319)

Minority interest in losses of
   Local Limited Partnerships                          135,249             2,532          146,100             8,216

Loss on liquidation of interests in Local Limited
   Partnerships (Note 2)                               (12,835)                -          (18,251)                -
                                                  ------------     -------------     ------------      ------------

Net Loss before extraordinary items                 (1,898,583)       (1,077,484)      (4,173,679)       (3,774,081)

Extraordinary gain on cancellation of
   indebtedness (Note 2)                             1,789,885                 -        1,868,051                 -

Extraordinary loss on forgiveness
   of indebtedness                                           -                 -                -           (51,595)
                                                  ------------     -------------     ------------      ------------

Net Loss                                          $   (108,698)    $  (1,077,484)    $ (2,305,628)     $ (3,825,676)
                                                  ============     =============     ============      ============

Net Loss allocated:
   To General Partners                            $     (1,087)    $     (10,775)    $    (23,056)     $    (38,257)
   To Limited Partners                                (107,611)       (1,066,709)      (2,282,572)       (3,787,419)
                                                  ------------     -------------     ------------      ------------
                                                  $   (108,698)    $  (1,077,484)    $ (2,305,628)     $ (3,825,676)
                                                  ============     =============     ============      ============

Net Loss before extraordinary items per
   Limited Partnership Unit (100,000 Units)       $    (18.80)     $     (10.66)     $    (41.32)      $    (37.36)
                                                  ===========      ============      ===========       ============

Extraordinary items per Limited Partnership
   Unit (100,000 Units)                           $     17.72      $          -      $     18.49       $     (0.51)
                                                  ===========      ============      ===========       ===========

Net Loss per Limited Partnership Unit
   (100,000 Units)                                $     (1.08)     $     (10.66)     $    (22.83)      $    (37.87)
                                                  ===========      ============      ===========       ============
 </TABLE>

 The  accompanying  notes are an integral part of these  combined
 financial statements.


 <PAGE>
          BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


              STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                                   (Unaudited)
                   For the Nine Months Ended December 31, 1997
 <TABLE>
 <CAPTION>

                                                                                         Net
                                                        Initial        Investor      Unrealized
                                        General         Limited         Limited         Gains
                                       Partners        Partners            Partners       (Losses)           Total
 <S>                                  <C>              <C>            <C>             <C>            <C>  
 
Balance at March 31, 1997             $ (602,381)      $ 5,000        $ 27,943,821    $  (1,947)     $  27,344,493

Net change in net unrealized
   losses on marketable
   securities available for sale               -             -                   -        2,600              2,600

Net Loss                                 (23,056)            -          (2,282,572)           -         (2,305,628)
                                      ----------       -------        ------------    ---------      -------------

Balance at December 31, 1997          $ (625,437)      $ 5,000        $ 25,661,249    $     653      $  25,041,465
                                      ==========       =======        ============    =========      =============
 </TABLE>

 The  accompanying  notes are an integral part of these  combined
 financial statements.


 <PAGE>
         BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                        COMBINED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
              For the Nine Months Ended December 31, 1997 and 1996
 <TABLE>
 <CAPTION>


                                                                          1997                     1996
                                                                      -------------             -------
 <S>                                                                  <C>                      <C>  
                                                                    
Net cash provided by (used for) operating activities                  $   (185,016)            $     55,634
                                                                      ------------             ------------

Cash flows from investing activities:
    Advances to affiliates                                                (317,709)                (116,335)
    Purchases of marketable securities                                    (373,539)                 (74,188)
    Proceeds from sales and maturities of
      marketable securities                                                420,313                   58,983
    Cash distributions received from Local
      Limited Partnerships                                                 315,906                  423,644
    Decrease in deferred acquisition fee escrow                            112,500                  112,500
    Payment of deferred acquisition fee                                   (112,500)                (112,500)
    Purchase of rental property                                           (197,866)                 (55,554)
    Deposits to replacement reserves                                        35,020                     (330)
                                                                      ------------             ------------
       Net cash provided by (used for) investing activities               (117,875)                 236,220
                                                                      ------------             ------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                    (86,431)                (117,178)
    Advances from affiliate                                                149,119                   62,872
    Repayment of notes receivable, affiliate                                17,002                        -
                                                                      ------------             ------------
       Net cash provided by (used for) financing activities                 79,690                  (54,306)
                                                                      ------------             ------------

Net increase (decrease) in cash and cash equivalents                      (223,201)                 237,548

Cash and cash equivalents, beginning                                       379,614                  268,040
                                                                      ------------             ------------

Cash and cash equivalents, ending                                     $    156,413             $    505,588
                                                                      ============             ============
 </TABLE>

 The  accompanying  notes are an integral part of these  combined
 financial statements.



 <PAGE>
        BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)




                                                        
                   Notes to the Combined Financial Statements
                                   (Unaudited)

The  unaudited  financial  statements  presented  herein  have been  prepared in
accordance  with the  instructions  to Form 10-Q and do not  include  all of the
information  and note  disclosures  required by  generally  accepted  accounting
principles.  These  statements  should be read in conjunction with the financial
statements and notes thereto included with the  Partnership's  10-K for the year
ended March 31, 1997. In the opinion of management,  these financial  statements
include  all  adjustments,  consisting  only of  normal  recurring  adjustments,
necessary to present fairly the Partnership's  financial position and results of
operations.  The results of  operations  for the period may not be indicative of
the results to be expected  for the year.  Certain  reclassifications  have been
made  to  prior  year  financial  statements  to  conform  to the  current  year
presentation.

The Managing  General Partner has elected to report results of the Local Limited
Partnerships  on a 90 day lag  basis,  because  the Local  Limited  Partnerships
report  their  results on a calendar  year  basis.  Accordingly,  the  financial
information  about  the  Local  Limited  Partnerships  that is  included  in the
accompanying combined financial statements is as of September 30, 1997 and 1996.

1.   Investments in Local Limited Partnerships

The  Partnership  uses the equity  method to  account  for its  limited  partner
interests in fifty Local Limited Partnerships  (excluding the Combined Entities)
which  own  and  operate  multi-family  housing  complexes,  most of  which  are
government-assisted.  The  Partnership,  as Investor Limited Partner pursuant to
the various Local Limited Partnership Agreements which contain certain operating
and  distribution  restrictions,  has  generally  acquired a 99% interest in the
profits, losses, tax credits and cash flows from operations of each of the Local
Limited  Partnerships,  except for Granite,  Colony Apartments and Harbour View,
where the Partnership's ownership interest is 97%, 49% and 48.96%, respectively.
Upon  dissolution,  proceeds will be  distributed  according to each  respective
partnership agreement.

The  following is a summary of  Investments  in Local  Limited  Partnerships  at
December 31, 1997, excluding the Combined Entities:
 <TABLE>
 <CAPTION>
 <S>                                                                                           <C>   

Capital contributions to Local Limited Partnerships and purchase
    price paid to withdrawing partners of Local Limited Partnerships                           $  59,851,809

Cumulative equity in loss of Local Limited Partnerships (excluding
   cumulative unrecognized losses of $23,981,475)                                                (39,676,371)

Cumulative cash distributions received from Local Limited Partnerships                            (2,147,880)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       18,027,558

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   6,430,577

   Accumulated amortization of acquisition fees and expenses                                      (1,373,900)
                                                                                               -------------

Investments in Local Limited Partnerships                                                         23,084,235

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------
                                                                                               $  21,449,235 
                                                                                               =============
 </TABLE>


 <PAGE>
       BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

1.   Investments in Local Limited Partnerships (continued)

The  Partnership's  share of the net losses of the Local  Limited  Partnerships,
excluding the Combined Entities,  for the nine months ended December 31, 1997 is
$5,035,488. For the nine months ended December 31, 1997, the Partnership has not
recognized  $2,941,221  of equity in losses  relating to certain  Local  Limited
Partnerships in which cumulative equity in losses and distributions exceeded its
total investments in these Local Limited Partnerships.

2.   Liquidation of Interests in Local Limited Partnerships

As previously  reported,  the Managing  General  Partner  transferred all of the
assets  of five of the  Texas  Partnerships  subject  to their  liabilities,  to
unaffiliated  entities in 1996. Lone Oak Apartments,  Hallet West Apartments and
Lakeway  Colony  were  transferred  on August 6, 1997,  September  23,  1997 and
October 30, 1997, respectively. Crestwood Place, Eagle Nest Apartments, One Main
Place and Pilot  Point  Apartments  were  transferred  on October 28,  1997.  If
negotiations continue as expected, transfer of the remaining property will occur
during the first half of 1998. In the meantime,  operating  deficits continue to
be funded from Partnership Reserves. For tax purposes,  these events will result
in both Section 1231 gain and cancellation of indebtedness  income. In addition,
the  transfer of ownership  will result in a nominal  amount of recapture of tax
credits because the Texas  Partnerships  represent only 2% of the  Partnership's
tax credits.

For financial  reporting  purposes,  loss on  liquidation  of interests in Local
Limited  Partnerships  of $18,251  and  extraordinary  gain on  cancellation  of
indebtedness of $1,868,051 were recognized in the period ended December 31, 1997
as a result of the transfer of Hallet West Apartments,  Crestwood  Place,  Eagle
Nest Apartments,  Lakeway Colony, One Main Place and Pilot Point Apartments.  No
loss was incurred on the transfer of Lone Oak Apartments since it had previously
been  written  to zero  because  its  equity  in  losses  exceeded  its  capital
contributions.

As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were  transferred  to the lender on May 2, 1997 after  prolonged  operating
difficulties  resulting from low occupancy,  capital  rehabilitation needs and a
depressed local economy.  The Local General Partner and Managing General Partner
were  involved in lengthy  workout  negotiations  with HUD, but  ultimately  the
mortgages  for  these  properties  were sold to a lender  in HUD's  August  1996
non-performing loan auction.  Although negotiations continued with the lender in
an  attempt  to  prevent  foreclosure,  a  workout  was  not  achieved,  and the
foreclosures occurred.  This transfer of title will result in a recapture tax in
1997  and the  allocation  of  taxable  income  which  will be  reported  on the
investors' 1997 tax return (filed in 1998). The Partnership's  carrying value of
these investments for financial reporting purposes is zero.



<PAGE>
       BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

3.   Supplemental Combining Schedules

                                 Balance Sheets
<TABLE>
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined                           Combined
                                     L.P. III (A)        Entities (B)      Eliminations          (A)
 <S>                                    <C>             <C>               <C>               <C> 

Assets
Cash and cash equivalents               $     48,880    $     107,533     $          -      $    156,413
Marketable securities, at fair value         288,358                -                -           288,358
Investments in Local Limited
   Partnerships, net                      25,017,759                -       (3,568,524)       21,449,235
Accounts receivable, net                     453,784          105,700         (453,784)          105,700
Interest receivable                            4,268                -                -             4,268
Notes receivable                           1,406,251                -       (1,406,251)                -
Prepaid expenses                               4,247           17,788                -            22,035
Tenant security deposits                           -           67,861                -            67,861
Replacement reserves                               -          166,567                -           166,567
Rental property at cost, net of
   accumulated depreciation                        -       15,484,934                -        15,484,934
Deferred acquisition fees escrow             225,000                -                -           225,000
Deferred expenses, net                             -          215,680                -           215,680
Other assets                                       -          267,888                -           267,888
                                        ------------    -------------     ------------      ------------
     Total Assets                       $ 27,448,547    $  16,433,951     $ (5,428,559)     $ 38,453,939
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Accounts payable to affiliates          $  1,482,331    $     466,225     $   (453,784)     $  1,494,772
Accounts payable and accrued
   expenses                                  184,783          525,422                -           710,205
Interest payable                                   -          283,261                -           283,261
Notes payable, affiliate                     514,968                -                -           514,968
Security deposits payable                          -           69,279                -            69,279
Due to affiliate                                   -          323,046                -           323,046
Deferred acquisition fees payable            225,000                -                -           225,000
General partner advances                           -          200,000                -           200,000
Mortgage notes payable                             -       10,083,499       (1,406,251)        8,677,248
                                        ------------    -------------     ------------      ------------
     Total Liabilities                     2,407,082       11,950,732       (1,860,035)       12,497,779
                                        ------------    -------------     ------------      ------------

Minority interest in Local
   Limited Partnerships                            -                -          914,695           914,695
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       25,040,812        4,483,219       (4,483,219)       25,040,812
Net unrealized losses on marketable
   securities                                    653                -                -               653
                                        ------------    -------------     ------------      ------------
     Total Partners' Equity               25,041,465        4,483,219       (4,483,219)       25,041,465
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 27,448,547    $  16,433,951     $ (5,428,559)     $ 38,453,939
                                        ============    =============     ============      ============
</TABLE>

(A) As of December 31, 1997. (B) As of September 30, 1997.


<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

3.   Supplemental Combining Schedules (continued)

                            Statements of Operations
                  For the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>

                                      Boston Financial
                                     Qualified Housing
                                       Tax Credits         Combined                           Combined
                                       L.P. III (A)      Entities (B)      Eliminations          (A)
<S>                                     <C>                <C>               <C>            <C> 

Revenue:
   Rental                               $          -       $   619,190       $        -     $    619,190
   Investment                                  8,344             1,832                -           10,176
   Other                                      86,394           (27,277)         (24,830)          34,287
                                        ------------       -----------     ------------     ------------
     Total Revenue                            94,738           593,745          (24,830)         663,653
                                        ------------       -----------     ------------     ------------

Expenses:
   Asset management fees, related party      109,095                 -                -          109,095
   General and administrative                138,783                 -                -          138,783
   Bad debt                                  690,469                 -                -          690,469
   Rental operations, exclusive
     of depreciation                               -           409,452                -          409,452
   Property management fees                        -            43,797                -           43,797
   Interest                                    1,500           235,731          (24,830)         212,401
   Depreciation                                    -           200,925                -          200,925
   Amortization                               34,197             6,554                -           40,751
                                        ------------       -----------     ------------     ------------
     Total Expenses                          974,044           896,459          (24,830)       1,845,673
                                        ------------       -----------     ------------     ------------

Loss before equity in income  (losses) 
   of Local Limited  Partnerships,  
   minority interest, loss on 
   liquidation of interests in Local 
   Limited Partnerships and
   extraordinary item                       (879,306)         (302,714)               -       (1,182,020)

Equity in income (losses) of Local
   Limited Partnerships                      783,443                 -       (1,622,420)        (838,977)

Minority interest in losses of Local
   Limited Partnerships                            -                 -          135,249          135,249

Loss on liquidation of interests
   in Local Limited Partnerships             (12,835)                -                -          (12,835)
                                        ------------       -----------     ------------     ------------

Net Loss before extraordinary item          (108,698)         (302,714)      (1,487,171)      (1,898,583)

Extraordinary gain on cancellation
   of indebtedness                                 -         1,789,885                -        1,789,885
                                        ------------       -----------     ------------     ------------

Net Income (Loss)                       $   (108,698)      $ 1,487,171     $ (1,487,171)    $   (108,698)
                                        ============       ===========     ============     ============
 </TABLE>

(A) For the three months ended December 31, 1997. (B) For the three months ended
September 30, 1997.


 <PAGE>
           BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

3.   Supplemental Combining Schedules (continued)

                            Statements of Operations
                   For the Nine Months Ended December 31, 1997
 <TABLE>
 <CAPTION>

                                      Boston Financial
                                     Qualified Housing
                                       Tax Credits         Combined                           Combined
                                       L.P. III (A)      Entities (B)      Eliminations          (A)
 <S>                                    <C>                <C>            <C>               <C> 

Revenue:
   Rental                               $          -       $ 1,868,953    $           -     $  1,868,953
   Investment                                 25,786             5,665                -           31,451
   Other                                     188,564            56,930          (51,833)         193,661
                                        ------------       -----------     ------------     ------------
     Total Revenue                           214,350         1,931,548          (51,833)       2,094,065
                                        ------------       -----------     ------------     ------------

Expenses:
   Asset management fees, related party      327,285                 -                -          327,285
   General and administrative                380,417                 -                -          380,417
   Bad debt                                  754,636                 -                -          754,636
   Rental operations, exclusive
     of depreciation                               -         1,263,861                -        1,263,861
   Property management fees                        -           131,987                -          131,987
   Interest                                    4,500           724,435          (51,833)         677,102
   Depreciation                                    -           596,022                -          596,022
   Amortization                              113,689            19,659                -          133,348
                                        ------------       -----------     ------------     ------------
     Total Expenses                        1,580,527         2,735,964          (51,833)       4,264,658
                                        ------------       -----------     ------------     ------------

Loss before equity in losses of Local 
   Limited  Partnerships,  minority 
   interest, loss on liquidation of 
   interests in Local Limited 
   Partnerships and extraordinary item    (1,366,177)         (804,416)               -       (2,170,593)

Equity in losses of Local Limited
   Partnerships                             (921,200)                -       (1,209,735)      (2,130,935)

Minority interest in losses of Local
   Limited Partnerships                            -                 -          146,100          146,100

Loss on liquidation of interests
   in Local Limited Partnerships             (18,251)                -                -          (18,251)
                                        ------------       -----------     ------------     ------------

Net Loss before extraordinary item        (2,305,628)         (804,416)      (1,063,635)      (4,173,679)

Extraordinary gain on cancellation
   of indebtedness                                 -         1,868,051                -        1,868,051
                                        ------------       -----------     ------------     ------------

Net Income (Loss)                       $ (2,305,628)      $ 1,063,635     $ (1,063,635)    $ (2,305,628)
                                        ============       ===========     ============     ============
 </TABLE>

(A) For the nine months ended  December 31, 1997.  (B) For the nine months ended
September 30, 1997.


<PAGE>
           BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

3.   Supplemental Combining Schedules (continued)

                            Statements of Cash Flows
 <TABLE>
 <CAPTION>

                                         Boston Financial
                                         Qualified Housing
                                            Tax Credits          Combined                               Combined
                                           L.P. III (A)        Entities (B)       Eliminations             (A)
<S>                                       <C>                 <C>                 <C>                <C>  

Net cash used for
   operating activities                   $     (116,595)     $     (68,421)      $          -       $    (185,016)
                                          --------------      -------------       ------------       -------------

Cash flows from investing activities:
   Advances to affiliates                       (427,215)                 -            109,506            (317,709)
   Purchases of marketable securities           (373,539)                 -                  -            (373,539)
   Proceeds from sales and maturities
     of marketable securities                    420,313                  -                  -             420,313
   Cash distributions received from
     Local Limited Partnerships                  315,906                  -                  -             315,906
   Decrease in deferred acquisition
     fee escrow                                  112,500                  -                  -             112,500
   Payment of deferred acquisition fee          (112,500)                 -                  -            (112,500)
   Purchase of rental property                         -           (197,866)                 -            (197,866)
   Deposits to replacement reserves                    -             35,020                  -              35,020
                                          --------------      -------------       ------------       -------------
Net cash used for
   investing activities                          (64,535)          (162,846)           109,506            (117,875)
                                          --------------      -------------       ------------       -------------

Cash flows from financing activities:
   Repayment of mortgage notes
      payable                                          -            (86,431)                 -             (86,431)
   Advances from affiliate                             -            258,625           (109,506)            149,119
   Repayment of notes receivable,
     affiliate                                    17,002                  -                  -              17,002
                                          --------------      -------------       ------------       -------------
Net cash provided by
   financing activities                           17,002            172,194           (109,506)             79,690
                                          --------------      -------------       ------------       -------------

Net decrease in cash
   and cash equivalents                         (164,128)           (59,073)                 -            (223,201)

Cash and cash equivalents,
   beginning                                     213,008            166,606                   -            379,614
                                          --------------      -------------       -------------     --------------

Cash and cash equivalents,
   ending                                 $       48,880      $     107,533       $           -     $      156,413
                                          ==============      =============       =============     ==============
 </TABLE>


(A) For the nine months ended  December 31, 1997.  (B) For the nine months ended
September 30, 1997.




 <PAGE>
 

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The  Partnership  (including  the Combined  Entities) had a decrease in cash and
cash  equivalents  of  $223,201  from  $379,614 at March 31, 1997 to $156,413 at
December 31, 1997.  This  decrease is  attributable  to cash used for  operating
activities and purchases of rental property.  These decreases are offset by cash
distributions  received from Local Limited  Partnerships and proceeds from sales
and  maturities  of  marketable  securities in excess of purchases of marketable
securities.

The Managing  General Partner  initially  designated 3% of the Gross Proceeds to
Reserves.  The Reserves were  established to be used for working  capital of the
Partnership  and  contingencies  related  to  the  ownership  of  Local  Limited
Partnership  interests.  The Managing  General  Partner may increase or decrease
such Reserves from time to time, as it deems appropriate.  During the year ended
March 31, 1993,  the Managing  General  Partner  decided to increase the Reserve
level to  3.75%.  Funds  approximating  $195,000  have been  withdrawn  from the
Reserves  to pay  legal  and  other  costs  related  to the Mod  Rehab  Issue as
previously  discussed.  Additionally,  professional  fees  relating  to  various
property issues totaling approximately  $1,559,000 have been paid from Reserves.
This amount includes  approximately  $1,290,000 for the Texas  Partnerships.  To
date, Reserve funds in the amount of approximately  $349,000 have also been used
to make additional capital  contributions to two Local Limited  Partnerships and
the Partnership has paid approximately  $1,196,000 (net of paydowns) to purchase
the mortgage of a Local Limited  Partnership.  To date, the Partnership has used
approximately  $1,262,000 of operating funds to replenish Reserves.  At December
31,  1997,  approximately  $283,000 of cash,  cash  equivalents  and  marketable
securities  have  been  designated  as  Reserves.  Reserves  may be used to fund
Partnership  operating  deficits,  if the Managing General Partner deems funding
appropriate. If Reserves are not adequate to cover the Partnership's operations,
the Partnership will seek other financing sources including, but not limited to,
the  deferral of Asset  Management  Fees paid to an  affiliate  of the  Managing
General  Partner or working with Local  Limited  Partnerships  to increase  cash
distributions.

In the  event a Local  Limited  Partnership  encounters  operating  difficulties
requiring  additional  funds, the Partnership might deem it in its best interest
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,290,000  noted above,  the  Partnership  has also advanced
approximately $768,000 to the Texas Partnerships and $608,000 to two other Local
Limited Partnerships to fund operating deficits.

Since the  Partnership  invests as a limited  partner,  the  Partnership  has no
contractual  duty to  provide  additional  funds to Local  Limited  Partnerships
beyond its specified investment. Thus, at December 31, 1997, the Partnership had
no contractual or other  obligation to any Local Limited  Partnership  which had
not been paid or provided for.

Cash Distributions

No cash distributions were made during the nine months ended December 31, 1997.

Results of Operations

For the three and nine months ended  December 31, 1997,  Partnership  operations
resulted in net losses of $108,698 and $2,305,628,  respectively, as compared to
net losses of $1,077,484 and $3,825,676  for the  respective  1996 periods.  The
decrease  in net  loss  is  primarily  attributable  to  extraordinary  gain  on
cancellation of indebtedness for Crestwood Place, Eagle Nest Apartments,  Hallet
West Apartments,  Lakeway Colony, One Main Place and Pilot Point Apartments. The
decrease is offset by an  increase  in bad debt  expense due to the write off of
accounts receivable from the transferred properties.  The decrease in net losses
is also offset by increases  in rental  operations,  interest  and  depreciation
expenses  because  Breckenridge  Creste's  operations  were  combined  with  the
Partnership's  effective September 1, 1996. One Texas Partnership is expected to
transfer in the first quarter of 1998.  Extraordinary  gain on  cancellation  of
indebtedness will be recognized for this transfer.



 <PAGE>
           BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)



Property Discussions

Prior to the transfer of the Texas Partnerships,  Limited Partnership  interests
had been acquired in sixty-nine Local Limited Partnerships which own and operate
rental properties in twenty-four states.  Forty-two of the properties,  totaling
3,935 units,  were  rehabilitated,  and twenty-seven  properties,  consisting of
1,614  units,  were newly  constructed.  All of the  properties  have  completed
construction  or  rehabilitation  and initial  lease-up.  Many of the  remaining
fifty-five Local Limited Partnerships in which the Partnership has invested have
stable operations and are operating satisfactorily.

Several properties are experiencing  operating  difficulties and generating cash
flow  deficits  due to a variety of reasons.  In most cases,  the Local  General
Partners of these  properties are funding the deficits  through  project expense
loans and  subordinated  loans or payments from escrows.  In instances where the
Local General Partners'  obligations to fund deficits have expired or otherwise,
the  Managing  General  Partner is  working  with the Local  General  Partner to
increase  operating  income,  reduce  expenses  or  refinance  the debt at lower
interest rates.

Willow Lake,  located in Kansas, is experiencing  operating  difficulties due to
soft rental market  conditions.  As previously  reported,  The Managing  General
Partner had negotiated a workout in 1994. The two year extension to this workout
will expire on June 30, 1998. The Managing  General  Partner is working with the
Local General  Partner to negotiate  permanent  debt service  relief.  The Local
General Partner and the Management  Agent are working together to increase rents
and monitor property expenses.

As previously reported, operations had been improving at Pleasant Plaza, located
in Malden,  Massachusetts,  as a result of the 1995 SHARP subsidy restructuring.
The SHARP mortgage  subsidy has been an important part of the property's  annual
income.  However,  effective October 1, 1997, the Massachusetts  Housing Finance
Agency  (MHFA),  which  provided  the SHARP  subsidies,  withdrew  future  SHARP
mortgage  subsidies from its portfolio of 77 SHARP  subsidized  properties.  The
Managing  General  Partner  joined a group of interested  parties and is working
with MHFA to find a solution  to the  problems  that will  result as a result of
withdrawn  subsidies.  Given  the  dependence  on the  mortgage  subsidy,  it is
possible  that the  property  will  default on its  mortgage  obligation.  It is
possible  that fund  reserves  will be used to support the property  until these
issues can be resolved.  The Local General Partner is in  negotiations  with the
MHFA to fund debt service  deficits that had been covered by the SHARP  mortgage
subsidies  and avoid a  default  on its  mortgage.  The  Local  General  Partner
believes it will cover the SHARP subsidy gap by  increasing  rents and some cost
containments.  In the meantime,  The Local General Partner has negotiated a 1998
budget with the MHFA. However, further negotiations to resolve these issues with
the MHFA, are expected in the first half of 1998. As we previously reported, the
Local General Partner was seeking bankruptcy protection. His reorganization plan
was approved in September  1997.  The plan will not materially  affect  property
operations or the Local General Partner's interest in the Partnership.

Another  property  affected by the  withdrawal  of the SHARP  subsidies is South
Holyoke,  located  in  Holyoke,  Massachusetts.  As  previously  reported,  this
property  continues to experience  occupancy  problems  resulting from increased
market competition and local economic conditions. The management agent, which is
currently  funding  the  deficits,   is  addressing  these  problems  through  a
combination of increased  advertising,  community  outreach and tighter  expense
monitoring.

As previously  reported,  Harbour View,  located in Staten Island, New York, had
defaulted on its HUD-insured loan. Subsequently, the lender assigned the loan to
HUD.  In  December  1996,  the  property's  mortgage  was sold at  auction to an
unaffiliated institutional buyer. The Managing General Partner and Local General
Partner  continue  to  participate  in  discussions  with  the new  lender.  The
Partnership's  ability to retain its interest in the property will depend on the
ability of the Local General  Partner or Partnership  affiliates to purchase the
mortgage or negotiate a satisfactory  workout agreement with the new lender. The
Partnership's carrying value of this investment for financial reporting purposes
is zero.


Property Discussions (continued)

Waterfront and Shoreline,  both located in Buffalo,  New York,  continue to have
operating deficits as a result of a soft rental market, deferred maintenance and
security issues. As previously reported,  the Managing General Partner and Local
General Partner have successfully  negotiated a grant from the New York Mortgage
Loan  Corporation.  The grant  should be funded  during 1998 and will be used to
upgrade the curb appeal and overall physical condition of the properties as well
as stabilize operations. Deficits continue to be funded by the management agent.
As noted  previously,  the  viability  of the  properties  depends  upon funding
deficits until receipt of the grant.  Both properties  currently carry cash flow
mortgages with New York State.

Breckenridge  Creste,  located in Duluth,  Georgia  continues  to operate  below
breakeven as a result of increased  vacancy,  a weak rental  market and deferred
maintenance issues. As previously  reported, a capital improvement plan had been
implemented to improve the curb appeal of the property. The capital improvements
completed to date include  exterior  painting,  exterior wood trim  replacement,
landscaping,  laundry room  decorating and  improvements,  pool repairs,  gutter
installation,   interior   unit  rehab,   carpet,   vinyl  floor  and  appliance
replacements. A special reserve account was set up at the property level to hold
funds for capital  improvements and operating deficits.  Expenditures from these
funds are carefully  monitored by property  management and the Managing  General
Partner.  Property management is currently preparing the 1998 budget and capital
improvement plan.

As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were  transferred  to the bank on May 2,  1997  after  prolonged  operating
difficulties  resulting from low occupancy,  capital  rehabilitation needs and a
depressed local economy.  The Local General Partner and Managing General Partner
were  involved in lengthy  workout  negotiations  with HUD, but  ultimately  the
mortgages  for  these  properties  were  sold to a bank  in  HUD's  August  1996
non-performing loan auction. Although negotiations continued with the bank in an
attempt to prevent foreclosure, a workout was not achieved, and the foreclosures
occurred.  This transfer of title will result in a recapture tax in 1997 and the
allocation of taxable income which will be reported on the  investors'  1997 tax
return (filed in 1998). The  Partnership's  carrying value of these  investments
for financial reporting purposes is zero.

As previously  reported,  the Managing  General  Partner  transferred all of the
assets of five of the  Texas  Partnerships,  subject  to their  liabilities,  to
unaffiliated entities in 1996. In 1997, The Managing General Partner transferred
all of the  assets of seven  more of the Texas  Partnerships,  subject  to their
liabilities, to unaffiliated entities. Negotiations between the Managing General
Partner,  the Lender and a  prospective  buyer for the  remaining  property  are
continuing  and a transfer  is  expected  in the first  quarter of 1998.  In the
meantime,  operating  deficits continue to be funded from Partnership  Reserves.
For tax  purposes,  these  events  will  result  in both  Section  1231 gain and
cancellation of indebtedness income. In addition, the transfer of ownership will
result in a  nominal  amount  of  recapture  of tax  credits  because  the Texas
Partnerships represent only 2% of the Partnership's tax credits.









 <PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)




PART II       OTHER INFORMATION

Items 1-5     Not applicable

Item 6        Exhibits and reports on Form 8-K

                (a)Exhibits - None

                (b)Reports  on Form 8-K - No  reports  on Form  8-K  were  filed
                   during the quarter ended December 31, 1997.


 <PAGE>
          BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


DATED: February 13, 1998        BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                CREDITS L.P. III

                                By: Arch Street III, Inc.,
                                    its Managing General Partner




                                /s/William E. Haynsworth
                                William E. Haynsworth
                                Managing Director, Vice President and
                                Chief Operating Officer



 <PAGE>