November 14, 1997




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 September 30, 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/Patricia Olsen-Goldberg
Patricia Olsen-Goldberg
Controller





QH3-Q2.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 September 30, 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  September 30, 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, 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 .


<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 - September 30, 1997 (Unaudited)
           and March 31, 1997                                                  1

         Combined Statements of Operations (Unaudited) - For the Three and Six
           Months Ended September 30, 1997 and 1996                            2

         Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Six Months Ended September 30, 1997           3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Six Months Ended September 30, 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 - September 30, 1997 and March 31, 1997
<TABLE>
<CAPTION>

                                                                   September 30,              March 31,
                                                                        1997                    1997
                                                                     (Unaudited)
Assets
<S>                                                                  <C>                    <C>    
Cash and cash equivalents                                            $    374,821           $    379,614
Marketable securities, at fair value                                      403,848                331,319
Investments in Local Limited Partnerships, net (Note 1)                22,351,139             23,983,675
Accounts receivable, net                                                  120,860                175,669
Interest receivable                                                         7,285                 17,607
Prepaid expenses                                                           47,071                 40,019
Tenant security deposits                                                   76,084                 66,439
Replacement reserves                                                      219,946                210,045
Rental property at cost, net of accumulated
   depreciation                                                        17,253,110             17,884,234
Deferred acquisition fees escrow                                          337,500                337,500
Deferred expenses, net                                                    222,234                235,339
Other assets                                                              299,217                130,130
                                                                     ------------           ------------
     Total Assets                                                    $ 41,713,115           $ 43,791,590
                                                                     ============           ============

Liabilities and Partners' Equity

Accounts payable to affiliates                                       $  1,380,973           $  1,193,182
Accounts payable and accrued expenses                                     842,213                611,515
Interest payable                                                          424,995                377,295
Note payable, affiliate                                                   514,968                514,968
Security deposits payable                                                  84,484                 82,054
Due to affiliate                                                          323,046                323,046
Deferred acquisition fees payable                                         337,500                337,500
General Partner advances                                                  200,000                200,000
Mortgage notes payable                                                 11,404,111             11,754,415
                                                                     ------------           ------------
     Total Liabilities                                                 15,512,290             15,393,975
                                                                     ------------           ------------

Minority interest in Local Limited Partnerships                         1,049,944              1,053,122
                                                                     ------------           ------------

General, Initial and Investor Limited Partners' Equity                 25,149,510             27,346,440
Net unrealized losses on marketable securities                              1,371                 (1,947)
                                                                     ------------           ------------
     Total Partners' Equity                                            25,150,881             27,344,493
                                                                     ------------           ------------
     Total Liabilities and Partners' Equity                          $ 41,713,115           $ 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 Six Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
                                                        Three Months Ended                  Six Months Ended
                                                  September 30,     September 30,     September 30,    September 30,
                                                      1997              1996              1997             1996
                                                 --------------   ---------------   --------------     --------
<S>                                               <C>              <C>               <C>               <C>  
Revenue:
   Rental                                         $    642,717     $     434,105     $  1,249,763      $    885,261
   Investment                                           11,546             7,843           21,275            67,362
   Other                                                40,909            82,874          159,374           127,939
                                                  ------------     -------------     ------------      ------------
     Total Revenue                                     695,172           524,822        1,430,412         1,080,562
                                                  ------------     -------------     ------------      ------------

Expenses:
   Asset management fees, related party                109,095           113,861          218,190           227,722
   General and administrative (includes
     reimbursements to affiliates of $98,159
     and $45,344 in 1997 and 1996, respectively)       118,805           115,933          241,634           196,315
   Bad debt                                             52,331                 -           64,167                 -
   Rental operations, exclusive of depreciation        394,505           327,373          854,409           604,495
   Property management fees (Note 3)                    45,965            46,888           88,190            69,021
   Interest                                            216,925           221,306          464,701           448,709
   Depreciation                                        203,985           136,955          395,097           250,172
   Amortization                                         46,299            40,780           92,597            88,844
                                                  ------------     -------------     ------------      ------------
     Total Expenses                                  1,187,910         1,003,096        2,418,985         1,885,278
                                                  ------------     -------------     ------------      ------------

Loss before equity in losses of Local Limited  Partnerships,  minority interest,
   loss on liquidation of interests in Local Limited Partnerships and
   extraordinary items                                (492,738)         (478,274)        (988,573)         (804,716)

Equity in losses of Local Limited Partnerships        (540,762)       (1,157,767)      (1,291,958)       (1,897,565)

Minority interest in losses of
   Local Limited Partnerships                            7,967             3,448           10,851             5,684

Loss on liquidation of interests in Local Limited
   Partnerships (Note 2)                                (5,416)                -           (5,416)                -
                                                  ------------     -------------     ------------      ------------

Net Loss before extraordinary items                 (1,030,949)       (1,632,593)      (2,275,096)       (2,696,597)

Extraordinary gain on cancellation of
   indebtedness (Note 2)                                78,166                 -           78,166                 -

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

Net Loss                                          $   (952,783)    $  (1,684,188)    $ (2,196,930)     $ (2,748,192)
                                                  ============     =============     ============      ============

Net Loss allocated:
   To General Partners                            $     (9,528)    $     (16,842)    $    (21,969)     $    (27,482)
   To Limited Partners                                (943,255)       (1,667,346)      (2,174,961)       (2,720,710)
                                                  ------------     -------------     ------------      ------------
                                                  $   (952,783)    $  (1,684,188)    $ (2,196,930)     $ (2,748,192)
                                                  ============     =============     ============      ============

Net Loss before extraordinary items per
   Limited Partnership Unit (100,000 Units)       $    (10.20)     $     (16.17)     $    (22.52)      $    (26.70)
                                                  ===========      ============      ===========       ===========

Extraordinary items per Limited Partnership
   Unit (100,000 Units)                           $        .77     $       (.51)     $        .77      $      (.51)
                                                  ============     ============      ============      ===========

Net Loss per Limited Partnership Unit
   (100,000 Units)                                $     (9.43)     $     (16.68)     $    (21.75)      $    (27.21)
                                                  ===========      ============      ===========       ===========
</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 Six Months Ended September 30, 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               -             -                   -        3,318              3,318

Net Loss                                 (21,969)            -          (2,174,961)           -         (2,196,930)
                                      ----------       -------        ------------    ---------      -------------

Balance at September 30, 1997         $ (624,350)      $ 5,000        $ 25,768,860    $   1,371      $  25,150,881
                                      ==========       =======        ============    =========      =============
</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 Six Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>


                                                                          1997                     1996
                                                                      -------------             -------
<S>                                                                   <C>                      <C> 

Net cash used for operating activities                                $   (129,377)            $   (177,233)
                                                                      ------------             ------------

Cash flows from investing activities:
    Advances to affiliates                                                 (52,009)                 (56,775)
    Purchases of marketable securities                                    (273,744)                 (49,376)
    Proceeds from sales and maturities of
      marketable securities                                                204,811                   37,677
    Cash distributions received from Local
      Limited Partnerships                                                 270,375                  319,442
    Purchase of rental property                                            (72,981)                 (43,748)
    Deposits to replacement reserves                                       (10,046)                 (13,986)
                                                                      ------------             ------------
       Net cash provided by investing activities                            66,406                  193,234
                                                                      ------------             ------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                    (61,707)                 (87,662)
    Advances from affiliate                                                119,885                   42,959
    Repayment of notes receivable, affiliate                                     -                   17,814
                                                                      ------------             ------------
       Net cash provided by (used for) financing activities                 58,178                  (26,889)
                                                                      ------------             ------------

Net decrease in cash and cash equivalents                                   (4,793)                 (10,888)

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

Cash and cash equivalents, ending                                     $    374,821             $    257,152
                                                                      ============             ============
</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 the prior year  financial  statements  to conform  to the  current  year
presentation.

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
September 30, 1997, excluding the Combined Entities:
<TABLE>
<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 $22,939,667)                                                (38,867,440)

Cumulative cash distributions received from Local Limited Partnerships                            (2,102,349)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       18,882,020

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   6,447,955

   Accumulated amortization of acquisition fees and expenses                                      (1,343,836)
                                                                                               -------------

Investments in Local Limited Partnerships                                                         23,986,139

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------
                                                                                               $  22,351,139
</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 six months ended September 30, 1997 is
$3,184,339. For the six months ended September 30, 1997, the Partnership has not
recognized  $1,899,413  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 and Hallet West  Apartments
were  transferred  on August  6,  1997 and  September  23,  1997,  respectively.
Negotiations  between the Managing General  Partner,  the Lender and prospective
buyers continued through the past quarter resulting in the disposition of 5 more
properties.  If  negotiations  continue as expected,  transfer of the  remaining
property  will  occur  during  the  fourth  quarter  of 1997.  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  $5,416  and  extraordinary  gain on  cancellation  of
indebtedness  of $78,166 were  recognized in the period ended September 30, 1997
as a result of the transfer of Hallet West  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
this investment 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               $    241,927    $     132,894     $          -      $    374,821
Marketable securities, at fair value         403,848                -                -           403,848
Investments in Local Limited
   Partnerships, net                      24,297,243                -       (1,946,104)       22,351,139
Accounts receivable, net                     826,545          120,860         (826,545)          120,860
Interest receivable                            8,271                -             (986)            7,285
Notes receivable                           1,423,253                -       (1,423,253)                -
Prepaid expenses                               5,662           41,409                -            47,071
Tenant security deposits                           -           76,084                -            76,084
Replacement reserves                               -          219,946                -           219,946
Rental property at cost, net of
   accumulated depreciation                        -       17,253,110                -        17,253,110
Deferred acquisition fees escrow             337,500                -                -           337,500
Deferred expenses, net                             -          222,234                -           222,234
Other assets                                       -          299,217                -           299,217
                                        ------------    -------------     ------------      ------------
     Total Assets                       $ 27,544,249    $  18,365,754     $ (4,196,888)     $ 41,713,115
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Accounts payable to affiliates          $  1,359,713    $     847,805     $   (826,545)     $  1,380,973
Accounts payable and accrued
   expenses                                  181,187          661,026                -           842,213
Interest payable                                   -          425,981             (986)          424,995
Notes payable, affiliate                     514,968                -                -           514,968
Security deposits payable                          -           84,484                -            84,484
Due to affiliate                                   -          323,046                -           323,046
Deferred acquisition fees payable            337,500                -                -           337,500
General partner advances                           -          200,000                -           200,000
Mortgage notes payable                             -       12,827,364       (1,423,253)       11,404,111
                                        ------------    -------------     ------------      ------------
     Total Liabilities                     2,393,368       15,369,706       (2,250,784)       15,512,290
                                        ------------    -------------     ------------      ------------

Minority interest in Local
   Limited Partnerships                            -                -        1,049,944         1,049,944
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       25,149,510        2,996,048       (2,996,048)       25,149,510
Net unrealized losses on marketable
   securities                                  1,371                -                -             1,371
                                        ------------    -------------     ------------      ------------
     Total Partners' Equity               25,150,881        2,996,048       (2,996,048)       25,150,881
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 27,544,249    $  18,365,754     $ (4,196,888)     $ 41,713,115
                                        ============    =============     ============      ============
</TABLE>

(A) As of September 30, 1997. 
(B) As of June 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 September 30, 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                               $          -       $   642,717       $        -     $    642,717
   Investment                                  9,417             2,129                -           11,546
   Other                                      32,435            35,477                -           67,912
                                        ------------       -----------       ----------     ------------
     Total Revenue                            41,852           680,323                -          722,175
                                        ------------       -----------       ----------     ------------

Expenses:
   Asset management fees, related party      109,095                 -                -          109,095
   General and administrative                118,805                 -                -          118,805
   Bad debt                                   52,331                 -                -           52,331
   Rental operations, exclusive
     of depreciation                               -           394,505                -          394,505
   Property management fees                        -            45,965                -           45,965
   Interest                                    1,500           242,428                -          243,928
   Depreciation                                    -           203,985                -          203,985
   Amortization                               39,747             6,552                -           46,299
                                        ------------       -----------       ----------     ------------
     Total Expenses                          321,478           893,435                -        1,214,913
                                        ------------       -----------       ----------     ------------

Loss before equity in losses of Local 
   Limited Partnerships, minority interest,
   loss on liquidation of interests in 
   Local Limited Partnerships and 
   extraordinary item                       (279,626)         (213,112)               -         (492,738)

Equity in losses of Local Limited
   Partnerships                             (667,741)                -          126,979         (540,762)

Minority interest in losses of Local
   Limited Partnerships                            -                 -            7,967            7,967

Loss on liquidation of interests
   in Local Limited Partnerships              (5,416)                -                -           (5,416)
                                        ------------       -----------       ----------     ------------

Net Loss before extraordinary item          (952,783)         (213,112)         134,946       (1,030,949)

Extraordinary gain on cancellation
   of indebtedness                                 -            78,166                -           78,166
                                        ------------       -----------       ----------     ------------

Net Loss                                $   (952,783)      $  (134,946)      $  134,946     $   (952,783)
                                        ============       ===========       ==========     ============
</TABLE>

(A) For the three months ended September 30, 1997.  
(B) For the three months ended June 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 Six Months Ended September 30, 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                               $          -       $ 1,249,763       $        -     $  1,249,763
   Investment                                 17,442             3,833                -           21,275
   Other                                     102,170            84,207          (27,003)         159,374
                                        ------------       -----------       ----------     ------------
     Total Revenue                           119,612         1,337,803          (27,003)       1,430,412
                                        ------------       -----------       ----------     ------------

Expenses:
   Asset management fees, related party      218,190                 -                -          218,190
   General and administrative                241,634                 -                -          241,634
   Bad debt                                   64,167                 -                -           64,167
   Rental operations, exclusive
     of depreciation                               -           854,409                -          854,409
   Property management fees                        -            88,190                -           88,190
   Interest                                    3,000           488,704          (27,003)         464,701
   Depreciation                                    -           395,097                -          395,097
   Amortization                               79,492            13,105                -           92,597
                                        ------------       -----------       ----------     ------------
     Total Expenses                          606,483         1,839,505          (27,003)       2,418,985
                                        ------------       -----------       ----------     ------------

Loss before equity in losses of Local 
   Limited Partnerships, minority 
   interest, loss on liquidation of 
   interests in Local Limited Partnerships 
   and extraordinary item                   (486,871)         (501,702)               -         (988,573)

Equity in losses of Local Limited
   Partnerships                           (1,704,643)                -          412,685       (1,291,958)

Minority interest in losses of Local
   Limited Partnerships                            -                 -           10,851           10,851

Loss on liquidation of interests
   in Local Limited Partnerships              (5,416)                -                -           (5,416)
                                        ------------       -----------       ----------     ------------

Net Loss before extraordinary item        (2,196,930)         (501,702)         423,536       (2,275,096)

Extraordinary gain on cancellation
   of indebtedness                                 -            78,166                -           78,166
                                        ------------       -----------       ----------     ------------

Net Loss                                $ (2,196,930)      $  (423,536)      $  423,536     $ (2,196,930)
                                        ============       ===========       ==========     ============

</TABLE>

(A) For the six months ended September 30, 1997.  
(B) For the six months ended June 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                   $      (63,017)     $     (66,360)      $          -       $    (129,377)
                                          --------------      -------------       ------------       -------------

Cash flows from investing activities:
   Advances to affiliates                       (109,506)                 -             57,497             (52,009)
   Purchases of marketable securities           (273,744)                 -                  -            (273,744)
   Proceeds from sales and maturities
     of marketable securities                    204,811                  -                  -             204,811
   Cash distributions received from
     Local Limited Partnerships                  270,375                  -                  -             270,375
   Purchase of rental property                         -            (72,981)                 -             (72,981)
   Deposits to replacement reserves                    -            (10,046)                 -             (10,046)
                                          --------------      -------------       ------------       -------------
Net cash provided by (used for)
   investing activities                           91,936            (83,027)            57,497              66,406
                                          --------------      -------------       ------------       -------------

Cash flows from financing activities:
   Repayment of mortgage notes
      payable                                          -            (61,707)                 -             (61,707)
   Advances from affiliate                             -            177,382            (57,497)            119,885
                                          --------------      -------------       ------------       -------------
Net cash provided by
   financing activities                                -            115,675            (57,497)             58,178
                                          --------------      -------------       ------------       -------------

Net increase (decrease) in cash
   and cash equivalents                           28,919            (33,712)                 -              (4,793)

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

Cash and cash equivalents,
   ending                                 $      241,927      $     132,894       $           -     $      374,821
                                          ==============      =============       =============     ==============

</TABLE>

(A) For the six months ended September 30, 1997.  
(B) For the six months ended June 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 $4,793  from  $379,614  at March 31,  1997 to  $374,821 at
September  30, 1997.  This decrease is  attributable  to cash used for operating
activities  and  purchases of  marketable  securities in excess of proceeds from
sales and  maturities of marketable  securities.  These  decreases are offset by
cash distributions received from Local Limited Partnerships.

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  $1,557,000 have been paid from Reserves.
This amount includes  approximately  $1,264,000 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  $1,238,000 (net of paydowns) to purchase
the mortgage of a Local Limited  Partnership.  To date, the Partnership has used
approximately  $1,243,000 of operating funds to replenish Reserves. At September
30,  1997,  approximately  $597,000 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 $1,264,000  noted above,  the  Partnership  has also advanced
approximately $730,000 to the Texas Partnerships and $328,000 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 September 30, 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 six months ended September 30, 1997.

Results of Operations

For the three and six months ended  September 30, 1997,  Partnership  operations
resulted in net losses of $952,783 and $2,196,930,  respectively, as compared to
net losses of $1,684,188 and $2,748,192  for the  respective  1996 periods.  The
decrease in net loss is primarily attributable to a decrease in equity in losses
of  Local  Limited  Partnerships  and  extraordinary  gain  on  cancellation  of
indebtedness  for  Hallet  West  Apartments.  These  decreases  are offset by an
increase in rental revenue and rental  operations  expense because  Breckenridge
Creste's operations were combined with the Partnership's  effective September 1,
1996. The decrease in equity in losses of Local Limited Partnerships is a result
of an  increase  in  unrecognized  losses  relating  to  certain  Local  Limited
Partnerships  whose  cumulative  equity in losses and  cumulative  distributions
exceeded its total investment in those  partnerships.  The decrease in equity in
losses of Local  Limited  Partnerships  are  expected  to  continue.  Five Texas
Partnerships  transferred  during  October,  1997, and the remaining one is also
expected  to  transfer  in the  fourth  quarter of 1997.  Extraordinary  gain on
cancellation of indebtedness will be recognized for these transfers.



<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


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
sixty-four 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.

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 by the end of the year. It is
possible  that fund  reserves  will be used to support the property  until these
issues can be resolved. As we previously reported,  the Local General Partner is
seeking  bankruptcy  protection.  His  reorganization  plan  is  expected  to be
approved  in 1997.  If  approved,  the plan is not likely to  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.

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.  Negotiations  between  the  Managing  General
Partner,  the Lender and  prospective  buyers  have  continued  through the past
quarter  resulting in the disposition of seven more properties.  If negotiations
continue as expected,  the transfer of the remaining  property will occur during
the fourth quarter of 1997. 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)

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


Property Discussions (continued)

Operating  deficits  on  Waterfront  and  Shoreline,   two  Buffalo,   New  York
properties,  continue 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.

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 bank  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
this investment for financial reporting purposes is zero.

As  previously  reported,  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. The capital improvement plan has
been  implemented and should improve the curb appeal of the property.  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.





<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 September 30, 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: November 14, 1997        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>