UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

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

For the quarterly period ended  September 30, 2009
                            -----------------------------

                              OR

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


For the transition period from          to
                               ---------   -------


                     Commission file number 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, Massachusetts            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 .

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer ___                       Accelerated Filer  ___
 Non-accelerated filer   ___  (Do not check if a
 smaller reporting company)                        Smaller reporting company X
                                                                           ----


Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                   Yes   No X .



<PAGE>


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









                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                        <C>


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

Item 1.  Financial Statements

         Balance Sheets  - September 30, 2009 (Unaudited) and
         March 31, 2009 (Audited)                                                               1

         Statements of Operations (Unaudited) - For the Three and Six
           Months Ended September 30, 2009 and 2008                                             2

         Statement of Changes in Partners' Equity
           (Unaudited) - For the Six Months Ended September 30, 2009                            3

         Statements of Cash Flows (Unaudited) - For the
           Six Months Ended September 30, 2009 and 2008                                         4

         Notes to the Financial Statements (Unaudited)                                          5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                                  9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                            16

Item 4.  Controls and Procedures                                                               16

PART II - OTHER INFORMATION

Items 1-6                                                                                      17

SIGNATURE                                                                                      18

CERTIFICATIONS                                                                                 19

</TABLE>

<PAGE>


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



                                 BALANCE SHEETS
           September 30, 2009 (Unaudited) and March 31, 2009 (Audited)





<TABLE>
<CAPTION>
<S>                                                                                <C>                <C>

                                                                              September 30          March 31
                                                                        -------------------      ---------------
Assets

Cash and cash equivalents                                                   $      483,292       $    3,014,508
Investment in Local Limited Partnership (Note 1)
                                                                                         -                    -

                                                                                -----------       --------------
   Total Assets                                                             $      483,292       $    3,014,508
                                                                                ===========      ===============

Liabilities and Partners' Equity

Due to affiliate                                                            $       22,329       $       34,248
Accrued expenses                                                                    33,523               49,019
                                                                               ---------------      ------------
   Total Liabilities                                                                55,852               83,267


General, Initial and Investor Limited Partners' Equity                             427,440            2,931,241
                                                                               -------------        -------------
   Total Liabilities and Partners' Equity                                   $      483,292        $   3,014,508
                                                                                ============        =============


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

</TABLE>

<PAGE>

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


                             STATEMENTS OF OPERATIONS
             For the Three and Six Months Ended September 30, 2009 and 2008
                                   (Unaudited)



<TABLE>
<CAPTION>
<S>                                               <C>                    <C>                  <C>               <C>

                                                           Three Months Ended                    Six Months Ended
                                                  September 30,       September 30,       September 30,       September 30,
                                                      2009                2008                2009                2008
                                                ---------------     ---------------     ---------------     ----------------
Revenue
   Investment                                   $         2,152     $         6,736     $         8,648     $         12,427
   Other                                                      4                   -                   4                    -
                                                ---------------     ---------------     ---------------     ----------------
       Total Revenue                                      2,156               6,736               8,652               12,427
                                                ---------------     ---------------     ---------------     ----------------

Expenses:
 Asset management fees, affiliate                         9,051              11,303              18,102               27,127
 General and administrative
(includes reimbursement to an
 affiliate in the amount of $13,677
 and $26,298 for the six months
 ended September 30, 2009 and 2008,
 respectively)                                           39,262              48,807              94,001               89,819
   Amortization                                               -                   -                   -                  444
                                                ---------------     ---------------     ---------------     ----------------
       Total Expenses                                    48,313              60,110             112,103              117,390
                                                ---------------     ---------------     ---------------     ----------------

Loss before equity in losses of
   Local Limited Partnerships and gain
   on sale of investments in
   Local Limited Partnerships                           (46,157)            (53,374)           (103,451)            (104,963)

Equity in losses of Local Limited
   Partnerships (Note 1)                                      -             (33,043)                  -             (100,462)

Gain on sale of investments in
   Local Limited Partnerships (Note 1)                  200,000           1,823,044             200,000            1,823,044
                                                ---------------     ---------------     ---------------     ----------------

Net Income                                      $       153,843     $     1,736,627     $        96,549     $      1,617,619
                                                ===============     ===============     ===============     ================

Net Income  allocated:
   General Partners                             $         1,538     $        17,366     $           965     $         16,176
   Limited Partners                                     152,305           1,719,261              95,584            1,601,443
                                                ---------------     ---------------     ---------------     ----------------
                                                $       153,843     $     1,736,627     $        96,549     $      1,617,619
                                                ===============     ===============     ===============     ================

Net Income Per Limited Partner
   Unit (100,000 Units)                         $          1.52     $         17.19     $           .95     $          16.01
                                                ===============     ===============     ===============     ================
</TABLE>

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

<PAGE>

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


                    STATEMENT OF CHANGES IN PARTNERS' EQUITY
                   For the Six Months Ended September 30, 2009
                                Unaudited)





<TABLE>
<CAPTION>
<S>                                               <C>               <C>                 <C>                 <C>

                                                                     Initial           Investor
                                                  General            Limited            Limited
                                                 Partners           Partners           Partners             Total

Balance at March 31, 2009                      $   29,246        $    5,000       $    2,896,995       $  2,931,241

Cash distributions                                      -                 -         (  2,600,350)
                                                                                                         (2,600,350)

Net Income                                            965                 -               95,584             96,549
                                               -------------     --------------     --------------     --------------

Balance at September 30, 2009                  $   30,211        $     5,000       $     392,229       $    427,440
                                               =============     ==============     ==============     ==============
</TABLE>

    The accompanying notes are an integral part of these financial statements.
<PAGE>

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


                          STATEMENTS OF CASH FLOWS
              For the Six Months Ended September 30, 2009 and 2008
                              (Unaudited)


<TABLE>
<CAPTION>
<S>                                                                                <C>               <C>


                                                                                  2009                2008
                                                                              -------------       --------------

Net cash used for operating activities                                        $    (130,866)      $    (136,045)

Net cash provided by investing activities                                           200,000           1,823,044

Net cash used for financing activities                                           (2,600,350)                  -
                                                                              --------------      -------------

Net increase (decrease) in cash and cash equivalents                             (2,531,216)          1,686,999

Cash and cash equivalents, beginning                                              3,014,508           1,424,937
                                                                              -------------       -------------

Cash and cash equivalents, ending                                             $     483,292       $   3,111,936
                                                                              =============       =============
</TABLE>

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



<PAGE>

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


                        NOTES TO THE 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 accounting principles generally
accepted in the United States of America. These statements should be read in
conjunction with the financial statements and notes thereto included with the
Partnership's Form 10-K for the year ended March 31, 2009. In the opinion of the
Managing General Partner, 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.

The Managing General Partner of the Partnership has elected to report results of
the Local Limited Partnerships in which the Partnership has a limited
partnership interest on a 90-day lag basis because the Local Limited
Partnerships report their results on a calendar year basis. Accordingly, the
financial information of the Local Limited Partnerships that is included in the
accompanying financial statements is as of June 30, 2009 and 2008.

Generally, profits, losses, tax credits and cash flow from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments. The
General Partners may have an obligation to fund deficits in their capital
accounts, subject to limits set forth in the Partnership Agreement. However, to
the extent that the General Partners' capital accounts are in a deficit
position, certain items of net income may be allocated to the General Partners
in accordance with the Partnership Agreement.

1.   Investment in Local Limited Partnership

The Partnership currently owns a limited partnership interest in one Local
Limited Partnership which was organized for the purpose of owning and operating
a multi-family housing complex, which is government-assisted. The Partnership's
ownership interest in the Local Limited Partnership is 99%. The Partnership may
have negotiated or may negotiate options with the Local General Partners to
purchase or sell the Partnership's interest in the Local Limited Partnership at
the end of the Compliance Period at nominal prices. In the event that Property
is sold to third parties, or upon dissolution of the Local Limited Partnership,
proceeds will be distributed according to the terms of the Local Limited
Partnership agreement.


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


                  NOTES TO THE FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


1. Investment in Local Limited Partnership (continued)
<TABLE>
<CAPTION>
<S>                                                                                 <C>              <C>

The following is a summary of investment in Local Limited Partnership at
September 30 and March 31, 2009:

                                                                               September 30          March 31
                                                                             ----------------    ---------------
Capital contributions paid to Local Limited Partnerships and purchase
 price paid to withdrawing partners of Local Limited Partnerships          $       3,597,307      $   8,855,847

Cumulative equity in losses of Local Limited Partnerships
 (excluding  cumulative unrecognized losses of $44,567,816
  and $58,573,097 at September 30 and March 31, 2009, respectively)               (3,664,427)        (6,655,895)

Cumulative cash distributions received from Local Limited Partnerships                     -           (954,292)
                                                                             ----------------    ----------------

Investments in Local Limited Partnerships before adjustments                         (67,120)         1,245,660

Excess investment costs over the underlying assets acquired:

   Acquisition fees and expenses                                                      75,142            189,984

   Cumulative amortization of acquisition fees and expenses                           (8,022)           (54,168)
                                                                             ----------------    ----------------

Investments in Local Limited Partnerships before valuation allowance                       -          1,381,476

Valuation allowance on investments in Local Limited Partnerships                           -         (1,381,476)
                                                                             ----------------    ----------------

Investments in Local Limited Partnerships                                    $             -    $             -
                                                                             ================    ================
</TABLE>

The Partnership had recorded a valuation allowance for its investments in
certain Local Limited Partnerships in order to appropriately reflect the
estimated net realizable value of these investments.

The Partnership's share of the net losses of the Local Limited Partnerships for
the six months ended September 30, 2009 and 2008 is $1,101,551 and $1,786,212,
respectively. For the six months ended September 30, 2009 and 2008, the
Partnership has not recognized $1,101,551 and $1,685,750, respectively, 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.

During the six months ended September 30, 2009, the Partnership sold its
investments in three Local Limited Partnerships, resulting in a net gain of
$200,000. During the six months ended September 30, 2008, the Partnership sold
its investments in two Local Limited Partnerships, resulting in a net gain of
$1,823,044.



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

                  NOTES TO THE FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


2.   Fair Value Measurements

In September 2006, the Financial Accounting Standards Board ("FASB") issued
authoritative guidance which provided enhanced guidance for using fair value to
measure assets and liabilities. The authoritative guidance, which is effective
for financial statements issued in fiscal years beginning after November 15,
2007 and interim periods within those fiscal years, established a common
definition of fair value, providing a framework for measuring fair value under
U.S. generally accepted accounting principles and expanding disclosure
requirements about fair value measurements. In February 2008, additional
authoritative guidance was issued which delays the above effective date for fair
value measurement of all nonfinancial assets and liabilities except those that
are recognized or disclosed at fair value in the financial statements on at
least an annual basis until November 15, 2008. The Partnership adopted certain
provisions of the authoritative guidance for financial assets and liabilities
recognized at fair value on a recurring basis effective April 1, 2008. This
partial adoption did not have a material impact on the Partnership's Financial
Statements. The Partnership does not expect the adoption of the remaining
provisions to have a material effect on the Partnership's financial position,
operations or cash flow. This authoritative guidance requires that a Partnership
measure its financial assets and liabilities using inputs from the three levels
of the fair value hierarchy. A financial asset or liability classification
within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement. The three levels are as follows:

     Level      1 - Inputs are unadjusted quoted prices in active markets for
                identical assets or liabilities that the Partnership has the
                ability to access at the measurement date.

     Level      2 - Inputs include quoted prices for similar assets and
                liabilities in active markets, quoted prices for identical or
                similar assets or liabilities in markets that are not active,
                inputs other than quoted prices that are observable for the
                asset or liability and inputs that are derived principally from
                or corroborated by observable market data by correlation or
                other means (market corroborated inputs).

     Level      3 - Unobservable inputs reflect the Partnership's judgments
                about the assumptions market participants would use in pricing
                the asset or liability since limited market data exists. The
                Partnership develops these inputs based on the best information
                available, including the Partnership's own data.

Financial assets accounted for at fair value on a recurring basis at September
30 and March 31, 2009 include cash equivalents of $483,292 and $3,014,508,
respectively.

In February 2007, the FASB issued authoritative guidance which permits entities
to choose to measure many financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings. This guidance is effective for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years. The Partnership has not elected to measure any financial assets and
financial liabilities at fair value.

3.   New Accounting Principles

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued authoritative guidance which provides guidance for
how uncertain tax positions should be recognized, measured, presented and
disclosed in the financial statements. As required, the Partnership adopted this
authoritative guidance effective April 1, 2007 and concluded that the effect was
not material to its financial statements. In December 2008, the FASB issued
additional authoritative guidance which deferred the effective date for certain
nonpublic organizations. The deferred effective date is intended to give the
FASB additional time to develop guidance on the application of this
authoritative guidance by pass through and not-for-profit entities. If required,
the General Partner may modify the Partnership's disclosures in accordance with
the FASB's guidance.


<PAGE>

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

                   NOTES TO THE FINANCIAL STATEMENTS (continued)
                                (Unaudited)


3.   New Accounting Principles (continued)

Codification and Hierarchy of Generally Accepted Accounting Principles

In June 2009, the FASB issued authoritative guidance which establishes the FASB
Standards Accounting Codification ("Codification") as the source of
authoritative GAAP recognized by the FASB to be applied to nongovernmental
entities. It is effective for interim and annual reporting periods ending after
September 15, 2009. The Partnership has adopted this authoritative guidance with
its September 30, 2009 reporting. The only other source of authoritative GAAP is
the rules and interpretive releases of the SEC which only apply to SEC
registrants. The Codification supersedes all the existing non-SEC accounting and
reporting standards upon its effective date. Since the issuance of the
Codification is not intended to change or alter existing GAAP, adoption of this
statement did not have an impact on the Partnership's financial position or
results of operations, but did change the way in which GAAP is referenced in the
Partnership's financial statements.

Subsequent Events

In May 2009, the FASB issued authoritative guidance which establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are
available to be issued. The Partnership adopted this authoritative guidance for
the quarter ended June 30, 2009 and has evaluated subsequent events after the
balance sheet date of September 30, 2009 through November 16, 2009, the date the
financial statements were issued.

Interim Disclosures about Fair Value Measurement

In April 2009, the FASB issued authoritative guidance which amends previous
professional standards, to require disclosures about the fair value of financial
instruments for interim reporting periods. The authoritative guidance, effective
for interim and annual reporting periods ending after June 15, 2009, also
requires companies to disclose the methods and significant assumptions used to
estimate the fair value of financial instruments in financial statements on an
interim basis and to describe any changes during the period. The Partnership
adopted this authoritative guidance for the quarter ended June 30, 2009 and the
adoption did not have a material impact on the Partnership's financial position
or results of operations.

4.   Significant Subsidiaries

The following Local Limited Partnership invested in by the Partnership
represents more than 20% of the Partnership's total assets or equity as of
September 30, 2009 or 2008 or net losses for the six months then ended. The
following financial information represents the performance of this Local Limited
Partnership for the three months ended June 30, 2009 and 2008:
<TABLE>
<CAPTION>
<S>                                                                         <C>                <C>

Riverfront Apartments, L.P.                                                 2009             2008
---------------------------                                            ---------------   -----------

Revenue                                                                $    N/A           $    440,100
Net Loss                                                               $    N/A           $    (68,000)

</TABLE>

<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



Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The use of
words like "anticipate, "intend," "project," "plan," "expect," "believe,"
"could," and similar expressions are intended to identify such forward-looking
statements. The Partnership intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements and is
including this statement for purposes of complying with these safe harbor
provisions. Although the Partnership believes the forward-looking statements are
based on reasonable assumptions, the Partnership can give no assurance that its
expectations will be attained. Actual results and timing of certain events could
differ materially from those projected in or contemplated by the forward-looking
statements due to a number of factors, including, without limitation, general
economic and real estate conditions and interest rates.

Critical Accounting Policies

The Partnership's accounting policies include those that relate to its
recognition of investments in Local Limited Partnerships using the equity method
of accounting. The Partnership's policy is as follows:

The Local Limited Partnerships in which the Partnership invests are Variable
Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a
non-controlling limited partner equity holder. The investments in the Local
Limited Partnerships are made primarily to obtain tax credits on behalf of the
Partnership's investors. The general partners of the Local Limited Partnerships,
who are considered to be the primary beneficiaries, control the day-to-day
operations of the Local Limited Partnerships. The general partners are also
responsible for maintaining compliance with the tax credit program and for
providing subordinated financial support in the event operations cannot support
debt and property tax payments. The Partnership, through its ownership
percentages, may participate in property disposition proceeds. The timing and
amounts of these proceeds are unknown but can impact the Partnership's financial
position, results of operations or cash flows. Because the Partnership is not
the primary beneficiary of these VIEs, it accounts for its investments in the
Local Limited Partnerships using the equity method of accounting. As a result of
its involvement with the VIEs, the Partnership's exposure to economic and
financial statement losses is limited to its investments in the VIEs (zero at
September 30 and March 31, 2009). The Partnership may be subject to additional
losses to the extent of any financial support that the Partnership voluntarily
provides in the future. Under the equity method, the investment is carried at
cost, adjusted for the Partnership's share of net income or loss and for cash
distributions from the Local Limited Partnerships; equity in income or loss of
the Local Limited Partnerships is included currently in the Partnership's
operations. A liability is recorded for delayed equity capital contributions to
Local Limited Partnerships. Under the equity method, a Local Limited Partnership
investment will not be carried below zero. To the extent that equity in losses
are incurred when the Partnership's carrying value of the respective Local
Limited Partnership has been reduced to a zero balance, the losses will be
suspended and offset against future income. Income from Local Limited
Partnerships, where cumulative equity in losses plus cumulative distributions
have exceeded the total investment in Local Limited Partnerships, will not be
recorded until all of the related unrecorded losses have been offset. To the
extent that a Local Limited Partnership with a carrying value of zero
distributes cash to the Partnership, that distribution is recorded as income on
the books of the Partnership.

The Partnership has implemented policies and practices for assessing
other-than-temporary declines in the values of its investments in Local Limited
Partnerships. Periodically, the carrying values of the investments are tested
for other-than-temporary impairment. If an other-than-temporary decline in
carrying value exists, a provision to reduce the investment to the sum of the
estimated remaining benefits will be recorded in the Partnership's financial
statements. The estimated remaining benefits for each Local Limited Partnership
consist of estimated future tax losses and tax credits over the estimated life
of the investment and estimated residual proceeds at disposition. Included in
the estimated residual proceeds calculation is current net operating income
capitalized at a regional rate specific to each Local Limited Partnership less
the debt of the Local Limited Partnership. Generally, the carrying values of
most Local Limited Partnerships will decline through losses and distributions in
amounts sufficient to prevent other-than-temporary impairments. However, the
Partnership may record similar impairment losses in the future if the expiration
of tax credits outpaces losses and distributions from any of the Local Limited
Partnerships.


<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 (continued)


Liquidity and Capital Resources

At September 30, 2009, the Partnership has cash and cash equivalents of $483,292
as compared with $3,014,508 at March 31, 2009. The decrease is mainly
attributable to cash distributions paid to Investor Limited Partners, partially
offset by cash received from the sale of investments in Local Limited
Partnerships.

The Managing General Partner initially designated 3.00% of the Gross Proceeds as
Reserves as defined in the Partnership Agreement. 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
increased the Reserve level to 3.75%. At September 30 and March 31, 2009,
approximately $445,000 and $2,490,000, respectively, has been designated as
Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,388,000 have been paid from Reserves. To date, Reserve funds in
the amount of approximately $534,000 also have been used to make additional
capital contributions to four Local Limited Partnerships and the Partnership has
paid approximately $452,000 (net of paydowns) to purchase the mortgage of The
Kyle Hotel. In the event a Local Limited Partnership encounters operating
difficulties requiring additional funds, the Partnership's management might deem
it in its best interest to voluntarily provide such funds in order to protect
its investment. As of September 30, 2009, the Partnership has advanced
approximately $1,578,000 to Local Limited Partnerships to fund operating
deficits.

The Managing General Partner believes that the investment income earned on the
Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the
Partnership's ongoing operations. 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. To date, the Partnership has used approximately $1,647,000 of
operating funds and proceeds from sales of investments in Local Limited
Partnerships to replenish Reserves.

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, as of September 30, 2009, the Partnership
had no contractual or other obligation to any Local Limited Partnership which
had not been paid or provided for.

Cash Distributions

During the six months ended September 30, 2009, the Partnership made cash
distributions of $2,600,350. The Partnership is currently working on disposing
of its interest in the Local Limited Partnership during the next eighteen
months. This disposition may result in cash available for distribution, but due
to the uncertainty of the sale, no guarantees can be made as to the extent of
the outcome on distributions. Based on the results of 2008 Property operations,
the Local Limited Partnership is not expected to distribute significant amounts
of cash to the Partnership because such amounts will be needed to fund Property
operating costs. In addition, many of the Properties benefit from some type of
federal or state subsidy and, as a consequence, are subject to restrictions on
cash distributions.

<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 (continued)


Results of Operations

Three Month Period

For the three months ended September 30, 2009, the Partnership's operations
resulted in net income of $153,843 as compared to net income of $1,736,627 for
the same period in 2008. The decrease in net income is primarily due to a larger
gain on sale of investments in Local Limited Partnerships recognized in the 2008
period. The decrease in gain on sale of investments in Local Limited
Partnerships is due to the sale of two investments in Local Limited Partnerships
with large proceeds during the three months ended September 30, 2008, whereas
the sale of two investments in Local Limited Partnerships in the current quarter
resulted in minimal proceeds. This decrease in net income is partially offset by
a decrease in equity in losses. The decrease in equity in losses is caused by
all investments in Local Limited Partnerships having a balance of zero as of
September 30, 2009; therefore, the Partnership is no longer recognizing equity
in losses.

Six Month Period

For the six months ended September 30, 2009, the Partnership's operations
resulted in net income of $96,549 as compared to net income of $1,617,619 for
the same period in 2008. The decrease in net income is primarily due to a larger
gain on sale of investments in Local Limited Partnerships recognized in the 2008
period. The decrease in gain on sale of investments in Local Limited
Partnerships is due to the sale of investments in two Local Limited Partnerships
with large proceeds during the six months ended September 30, 2008, whereas the
sale of three investments in Local Limited Partnerships during the six months
ended September 30, 2009 resulted in minimal proceeds. This decrease in net
income is partially offset by a decrease in equity in losses. The decrease in
equity in losses is caused by all investments in Local Limited Partnerships
having a balance of zero as of September 30, 2009; therefore, the Partnership is
no longer recognizing equity in losses.

Portfolio Update

The Partnership was formed on August 9, 1988 under the laws of the State of
Delaware for the primary purpose of investing, as a limited partner, in Local
Limited Partnerships, which own and operate apartment complexes, most of which
benefit from some form of federal, state or local assistance program and each of
which qualify for low-income housing tax credits. The Partnership's objectives
are to: (i) provide current tax benefits in the form of tax credits which
qualified investors may use to offset their federal income tax liability; (ii)
preserve and protect the Partnership's capital; (iii) provide limited cash
distributions which are not expected to constitute taxable income during
Partnership operations; and (iv) provide cash distributions from sale or
refinancing transactions. The fiscal year of the Partnership ends on March 31.

Municipal Mortgage & Equity, LLC ("MuniMae") has now sold substantially all of
the assets of its Low Income Housing Tax Credit ("LIHTC") business to a venture
consisting of JEN Partners, LLC or its affiliates ("JEN") and Real Estate
Capital Partners, LP or its affiliates ("RECP"). The first stage of this sale
closed on July 30, 2009 and the second stage closed on October 13, 2009. The
business is owned by Boston Financial Investment Management, LP, a Delaware
limited partnership, which is directly and indirectly owned by JEN and RECP
("Boston Financial"). The general partner of Boston Financial is BFIM
Management, LLC, a JEN affiliate. From July 30, 2009 through October 13, 2009,
MuniMae had engaged BFIM Asset Management, LLC ("BFIM"), an affiliate of Boston
Financial, to provide asset management to the Partnership. Most of the employees
of MuniMae's LIHTC business have joined Boston Financial, the operations of the
business are to remain intact in the Boston office and the Partnership will
continue to be managed and administered in the ordinary course.


<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 (continued)


Portfolio Update (continued)

Arch Street III, Inc. is the Managing General Partner of the Partnership ("Arch
Street") and Arch Street III Limited Partnership is the co-General Partner of
the Partnership ("Arch Street LP"). The general partner of Arch Street LP is
Arch Street. In connection with the above-described transaction, on October 13,
2009, control of the Managing General Partner and the co-General Partner were
directly and/or indirectly transferred from an affiliate of MuniMae to Boston
Financial. The transfer will not change the organizational structure of the
Partnership. The principal office and place of business of the Partnership will
continue to be 101 Arch Street, 13th Floor, Boston, Massachusetts 02110.

As of September 30, 2009, the Partnership's investment portfolio consisted of a
limited partnership interest in one Local Limited Partnership, which owns and
operates a multi-family apartment complex and which had generated Tax Credits.
Since inception, the Partnership generated Tax Credits, net of recapture, of
approximately $1,340 per Limited Partner Unit. The aggregate amount of Tax
Credits generated by the Partnership is consistent with the objective specified
in the Partnership's prospectus.

In August 2009, the Partnership distributed $197,951, or $1.98 per Unit to
Limited Partners, representing a distribution from the proceeds of previously
reported dispositions of Properties and/or the Partnership's investments in the
Local Limited Partnerships owning these properties. In May 2009, the Partnership
distributed $2,402,399, or $24.02 per Unit to Limited Partners, representing a
distribution from the proceeds of previously reported dispositions of Properties
and/or the Partnership's investments in the Local Limited Partnerships owning
these properties. The Managing General Partner anticipates making additional
distributions in the future.

Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set aside requirements for at least 15 calendar years
from the date the Property is placed in service. Failure to do so would result
in recapture of a portion of the Property's Tax Credits. The Compliance Period
of the remaining property in which the Partnership has an interest expired by
December 31, 2006. The Managing General Partner has negotiated agreements that
will ultimately allow the Partnership to dispose of its interest in the
remaining Local Limited Partnership.

The Partnership disposed of two Local Limited Partnerships interests during the
three months ending September 30, 2009. The Managing General Partner will
continue to pursue the disposition of the Partnership's remaining Local Limited
Partnership interest. The Partnership shall dissolve and its affairs shall be
wound up upon the disposition of the final Local Limited Partnership interest
and other assets of the Partnership. Investors will continue to be Limited
Partners, receiving K-1s and quarterly and annual reports, until the Partnership
is dissolved.

As described in previous periodic reports, in February, 2007, various Boston
Financial public funds (the "Fund" or "Funds"), including Boston Financial
Qualified Housing Tax Credits L.P. III (the "Partnership"), reached an agreement
to resolve several lawsuits and pending disputes between the Partnership and the
Funds and their general partners on the one hand, and a group of limited partner
unit investors on the other hand. The group of investors included Park G.P.,
Inc., Bond Purchase, L.L.C. and various other entities related to David L.
Johnson (the "Johnson Group") and Everest Housing Investors 2, LLC and various
other Everest-related entities (the "Everest Group"; the Johnson Group and the
Everest Group are hereinafter collectively referred to as the "Johnson and
Everest Groups"). Per the terms of the parties' agreement, these lawsuits were
then dismissed. The Johnson and Everest Groups further agreed at that time to
refrain from interfering in various ways with the conduct of the business of the
Partnership and the business of another Fund, Boston Financial Qualified Housing
Tax Credits L.P. IV ("QH4").

<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 (continued)


Portfolio Update (continued)

Also as previously reported, beginning in November, 2007, the Johnson and
Everest Groups filed new lawsuits against QH4 and its general partners in
various jurisdictions, as part of an effort to replace the existing general
partners with parties related to the Everest Group, to prevent QH4 from selling
any of its assets without limited partner consent, and to interfere with
specific arms length sales by QH4 of certain of its assets. QH4 responded with
its own lawsuits against the Johnson and Everest Groups to block these efforts
as well as to claim damages arising from the Johnson and Everest Groups'
conduct. The following lawsuits concerning QH4 (collectively, the
"Johnson/Everest Lawsuits"), were filed in the November 2007 through April 2008
time period:

        o  On November 29, 2007, QH4 and its general partners were sued
           in Superior Court for the County of Los Angeles, California by a
           Limited Partner named Danford Baker and companies named Everest
           Housing Investors 2, LP and Everest Management, LLC with which Mr.
           Baker is affiliated (collectively, "Everest"). Everest dismissed
           this lawsuit without prejudice on April 17, 2008.

        o  On or about, May 6, 2008, the same Everest parties referenced above
           in the 1st California lawsuit filed a nearly identical Complaint
           against QH4 and its general partners in the same Superior Court for
           the County of Los Angeles, California. Everest dismissed this 2nd
           California lawsuit without prejudice on November 11, 2008.

        o  On January 22, 2008, QH4 and its general partners were sued in the
           District Court of Johnson County, Kansas by a Limited Partner named
           McDowell Investments, L.P. ("McDowell").

        o  On January 29, 2008, QH4 and its general partners filed suit against
           McDowell in the Superior Court for Suffolk County, Massachusetts.

        o  On April 22, 2008, QH4 and its general  partners filed suit in the
           Superior Court for Suffolk  County,  Massachusetts  against the
           following  defendants:  Everest Housing  Investors 2, L.P.;  Everest
           Management LLC; Everest  Properties,  Inc.; Everest  Properties,
           LLC; McDowell  Investments,  L.P.; MGM Holdings,  LLC; Park G.P.,
           Inc., Bond Purchase,  L.L.C.; Anise L.L.C.; Paco Development,
           L.L.C.;  Maxus Realty Trust, Inc.; David L. Johnson;  W.
           Robert Kohorst;  Danford M. Baker; Monte G. McDowell; and
           Kevan D. Acord.

Effective April 24, 2009, the Partnership, along with QH4 and several of the
other Funds, reached an agreement with the Johnson and Everest Groups to resolve
their disputes and the Johnson/Everest Lawsuits (the "Settlement Agreement").
Pursuant to the Settlement Agreement, on May 19, 2009, McDowell filed a
dismissal of the Johnson/Everest Lawsuit pending in Johnson County, Kansas. On
May 21, 2009, the parties filed with the Massachusetts court joint stipulations
of dismissal with respect to the two Johnson/Everest Lawsuits initiated in
Massachusetts.

The Settlement Agreement provides, among other things, that (a) the parties
exchange mutual releases and covenant not to bring lawsuits against each other
in the future, (b) the parties dismiss claims and counterclaims asserted in the
various lawsuits without prejudice, and (c) the Johnson and Everest Groups agree
not to take a variety of actions which could interfere with the conduct of the
business of the Partnership and other Funds. The Settlement Agreement also sets
out a schedule for future cash distributions to the limited partners and for the
eventual dissolution of the Partnership and QH4. The Settlement Agreement was
attached as Exhibit 99-1 to the Partnership's Form 8-K filed on May 21, 2009.

In addition, effective April 24, 2009, the Partnership and QH4 entered into
purchase agreements (the "Purchase Agreements") with certain members of the
Johnson and Everest Groups permitting them to purchase, subject to


<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 (continued)


Portfolio Update (continued)

various conditions and at specified prices which the Partnership believes
represent fair market value, certain interests held by the Partnership and by
QH4 in Local Limited Partnerships. The Settlement Agreement remains effective
regardless of whether any of the Local Limited Partnership interests are
purchased.

With respect to the Partnership, the Purchase Agreements provide for the
purchase by affiliates of the Everest Group, for the total price of $200,000, of
the Partnership's interests in:

         River Front Apartments, L.P., which owns a property in Sunbury, PA; and
         Susquehanna View, L.P., which owns a property in Camp Hill, PA.

The sale of these Partnership interests closed on July 24, 2009.

Property Discussions

The remaining Property, in which the Partnership currently has an interest,
operated below breakeven as of June 30, 2009. The Local General Partner funds
the Property deficits through project expense loans, subordinated loans or
operating escrows. This Property, Waterfront, has had persistent operating
difficulties that could either: (i) have an adverse impact on the Partnership's
liquidity; or (ii) result in the Managing General Partner deeming it appropriate
for the Partnership to dispose of its interest in the Local Limited Partnership.
In addition to the Property discussion for this one remaining property, included
in the Property Discussions are any properties that have been dissolved in the
current and prior fiscal year.

As previously reported, the Managing General Partner anticipated the
Partnership's interest in the Local Limited Partnership that owns Walker Woods,
located in Dover, Delaware, would be terminated upon the sale of the Property in
late 2008. On September 12, 2008, the underlying Property was sold, effectively
terminating the Partnership's interest in the Local Limited Partnership that
owned Walker Woods. The Partnership received $424,239, or $4.24 per Unit, for
its interest in this Local Limited Partnership. On February 2, 2009, the
Partnership received an additional $4,814, or $0.05 per Unit, from the final
contingency holdback. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, has retained the sales proceeds in
Reserves for the time being until it deems a subsequent distribution to be
prudent. The Managing General Partner does not expect to receive any further
proceeds. The sale resulted in a 2008 taxable loss of $97,952, or about $0.98,
per Unit. The Partnership no longer has an interest in this Local Limited
Partnership.

As previously reported, the Managing General Partner and Local General Partner
of Wood Creek, located in Calcium, New York, were exploring an exit strategy
that would result in a mid-2008 disposal of the Partnership's interest in the
Local Limited Partnership. On September 12, 2008 the underlying Property was
sold, effectively terminating the Partnership's interest in the Local Limited
Partnership that owned Wood Creek. The Partnership received $1,413,851, or about
$14.14 per Unit, for its interest. The Managing General Partner, in accordance
with and as permitted by the Partnership Agreement, has retained the sales
proceeds in Reserves for the time being until it deems a subsequent distribution
to be prudent. The sale resulted in 2008 taxable loss of $224,885, or about
$2.25, per Unit. The Partnership no longer has an interest in this Local Limited
Partnership.

As previously reported, Waterfront and Shoreline, both located in Buffalo, New
York, continue to have operating deficits as a result of a soft rental market,
low occupancy and deferred maintenance, which impacts the marketability of the
developments. The mortgage loans on both Properties are payable only out of
available cash flow and neither Property has made mortgage payments in several
years. The Managing General Partner and the Local General Partner commenced
discussions regarding the options available to improve operations at, or dispose
of, the Properties. An agreement was reached whereby the Managing General
Partner would allow the Local General Partner to transfer its Local General
Partner interest to a developer that will re-syndicate the Properties. In
return,


<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 (continued)


Property Discussions (continued)

the Partnership obtained both a put option allowing the Partnership to transfer
its interests in the Local Limited Partnerships for a nominal sum and a pledge
by the incoming Local General Partner to pay any Tax Credit recapture incurred
due to the transfer of the Local Limited Partnerships prior to the end of the
Compliance Period. These transfers of the Local General Partner interests
occurred during April 2005. The transfer of the Partnership's interest in
Shoreline occurred June 8, 2009. The transaction did not result in any net sales
proceeds to the Partnership. This transaction is expected to result in 2009
taxable income projected to be approximately $10,300,000, or about $103 per
Unit. The Partnership no longer has an interest in this Local Limited
Partnership. The transfer of the Partnership's interests in Waterfront is
currently expected to occur in the fiscal year ending March 31, 2011. The
Managing General Partner does not expect this transaction to result in any net
sales proceeds to the Partnership. This transaction is expected to result in
taxable income projected to be approximately $36,400,000, or $364 per Unit.

As previously reported, in accordance with the terms of their respective
Partnership Agreements, the Managing General Partner, effective November 28,
2007, transferred the Partnership's interest in the Local Limited Partnerships
that owned River Front Apartments, L.P., located in Sunbury, PA, and Susquehanna
View, L.P., located in Camp Hill, PA. The interests in the aforementioned Local
Limited Partnerships were transferred to MMA River Front, L.P., and MMA
Susquehanna View, L.P. (together, the "Transferee Partnerships"). The
Partnership is the sole Limited Partner of each of the Transferee Partnerships.
An affiliate of the Partnership is the general partner of each of the Transferee
Partnerships and has obtained a 1% interest in each of the Transferee
Partnerships in exchange for a promissory note in favor of the Partnership.

In processing these transactions, the Managing General Partner acted out of
necessity, due to the impending expiration of the Partnership's ability to
transfer its interest in the above-mentioned Local Limited Partnerships without
the Local General Partner's consent. As previously disclosed, these Local
Limited Partnership Interests were originally expected to be sold as part of a
settlement between the Partnership, Qualified Housing Tax Credits L.P. IV,
several of the Funds, and certain of their affiliates on the one hand, and the
Johnson and Everest Groups on the other hand. When the Johnson and Everest
Groups failed to exercise their option to purchase these Local Limited
Partnership Interests, the above-described transfers were carried out. The
Managing General Partner then had flexibility in being able to dispose of the
Partnership's interest in the Local Limited Partnerships without the Local
General Partners' consent, expediting the Managing General Partner's ability to
liquidate the assets of, and dissolve, the Local Limited Partnerships. It is
possible that such Local General Partner may contest this right to free
transferability.

Effective April 24, 2009, contemporaneously with signing the Settlement
Agreement of the same date, the Managing General Partner and certain members of
the Johnson and Everest Groups entered into Purchase Agreements which created
rights for the Johnson and Everest Groups to acquire the Partnership's interests
in River Front Apartments, L.P., located in Sunbury, PA, and Susquehanna View,
L.P., located in Camp Hill, PA, for cash at fair market prices, for an aggregate
price of $200,000, or $2.00 per Unit. The Johnson and Everest Groups' purchase
of the Investor Limited Partner's interest was effective July 24, 2009. The
Managing General Partner expects the sale of the Partnerships interest in River
Front Apartments to result in a 2009 estimated taxable gain of approximately
$600,000, or about $6.00 per Unit. The Managing General Partner expects the sale
of the Partnerships interest in Susquenhanna View to result in a 2009 estimated
taxable gain of approximately $3,330,000, or about $33.30 per Unit. The
Partnership no longer has an interest in these two Local Limited Partnerships.


<PAGE>


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

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Non Applicable

                             CONTROLS AND PROCEDURES



Disclosure Controls and Procedures

The Partnership maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in reports filed under the Securities
Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and
reported within the specified time periods. The Partnership's Chief Executive
Officer and its Chief Financial Officer (collectively, the "Certifying
Officers") are responsible for maintaining disclosure controls for the
Partnership. The controls and procedures established by the Partnership are
designed to provide reasonable assurance that information required to be
disclosed by the issuer in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms.

As of the end of the period covered by this report, the Certifying Officers
evaluated the effectiveness of the Partnership's disclosure controls and
procedures. Based on the evaluation, the Certifying Officers concluded that as
of September 30, 2009, the Partnership's disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the applicable rules and forms, and that it is accumulated and communicated
to our management, including the Certifying Officers, as appropriate to allow
timely decisions regarding required disclosure.

Internal Control over Financial Reporting

The Certifying Officers have also concluded that there was no change in the
Partnership's internal controls over financial reporting identified in
connection with the evaluation that occurred during the Partnership's second
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Partnership's internal control over financial reporting.


<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

                  31.1   Certification of Principal Executive Officer and
                         Principal Financial Officer pursuant to Section 302
                         of the Sarbanes-Oxley Act of 2002.
                  31.2   Certification of Principal Executive Officer and
                         Principal Financial Officer pursuant to Section 302
                         of the Sarbanes-Oxley Act of 2002.
                  32.1   Certification of Principal Executive Officer and
                         Principal Financial Officer pursuant to Section 906
                         of the Sarbanes-Oxley Act of 2002.
                  32.2   Certification of Principal Executive Officer and
                         Principal Financial Officer pursuant to Section 906
                         of the Sarbanes-Oxley Act of 2002.

              (b) Reports on Form 8-K - No reports on Form 8-K were filed during
                  the quarter ended September 30, 2009


<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.


Date: November 16, 2009               BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                      CREDITS L.P. III

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



                                    /s/Kenneth J. Cutillo
                                     --------------------
                                       Kenneth J. Cutillo
                                       President
                                       Arch Street III, Inc.


<PAGE>


<PAGE>