November 12, 2004


Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC.  20549


Re:    Boston Financial Qualified Housing Tax Credits L.P. III
       Report on Form 10-QSB for the Quarter Ended September 30, 2004
       File Number 01-18462


Dear Sir/Madam:

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/Stephen Guilmette
Stephen Guilmette
Assistant Controller





QH3-Q2.DOC



<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB


(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, 2004
                                       ----------------------------------------

                                                         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
       incorporation or organization)                 Identification No.)


   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

<TABLE>
<CAPTION>


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

Item 1.  Financial Statements

<S>                                                                                         <C>
         Balance Sheet (Unaudited) - September 30, 2004                                       1

         Statements of Operations (Unaudited) - For the Three and Six
           Months Ended September 30, 2004 and 2003                                           2

         Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Six Months Ended September 30, 2004                          3

         Statements of Cash Flows (Unaudited) - For the
           Six Months Ended September 30, 2004 and 2003                                       4

         Notes to the Financial Statements (Unaudited)                                        5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                                7

Item 3.  Controls and Procedures                                                             14

PART II - OTHER INFORMATION

Items 1-6                                                                                    15

SIGNATURE                                                                                    16

</TABLE>


<PAGE>


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


                                  BALANCE SHEET
                               September 30, 2004
                                   (Unaudited)



<TABLE>
<CAPTION>


Assets

<S>                                                                                       <C>
Cash and cash equivalents                                                                 $        357,974
Investments in Local Limited Partnerships (Note 1)                                               4,098,563
Other assets                                                                                           127
                                                                                          ----------------
     Total Assets                                                                         $      4,456,664
                                                                                          =================

Liabilities and Partners' Deficiency

Due to affiliates                                                                         $      4,377,452
Accrued expenses                                                                                   431,133
                                                                                          ----------------
     Total Liabilities                                                                           4,808,585

General, Initial and Investor Limited Partners' Deficiency                                        (351,921)
                                                                                          ----------------
     Total Liabilities and Partners' Deficiency                                           $      4,456,664
                                                                                          =================
</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 OPERATIONS
         For the Three and Six Months Ended September 30, 2004 and 2003
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                        Three Months Ended                Six Months Ended
                                                  September 30,     September 30,     September 30,    September 30,
                                                      2004              2003              2004             2003
                                                 --------------   ---------------   --------------     -------------
Revenue:
<S>                                              <C>              <C>               <C>                <C>
   Investment                                    $          896   $         4,192   $        1,738     $       9,353
   Other                                                 51,263            32,475           94,806            33,971
                                                 --------------   ---------------   --------------     -------------
       Total Revenue                                     52,159            36,667           96,544            43,324
                                                 --------------   ---------------   --------------     -------------

Expenses:
   Asset management fees, affiliate                      63,470            95,376          117,027           190,752
   Provision for valuation of advances to
     Local Limited Partnerships                          31,845            21,335           63,690            36,335
   General and administrative (includes
     reimbursements to an affiliate of $241,180
     and $192,853 in 2004 and 2003, respectively)       161,333           144,347          326,866           293,608
   Amortization                                           1,353            11,380           12,733            22,760
   Interest                                               1,500             1,500            3,000             3,000
                                                 --------------   ---------------   --------------     -------------
       Total Expenses                                   259,501           273,938          523,316           546,455
                                                 --------------   ---------------   --------------     -------------

Loss before equity in losses of Local
   Limited Partnerships                                (207,342)         (237,271)        (426,772)         (503,131)

Equity in losses of Local Limited
   Partnerships (Note 1)                               (115,108)         (326,065)        (454,939)         (595,958)

Gain on sale of investments in Local
   Limited Partnerships (Note 1)                         75,000                 -           75,000                 -
                                                 --------------   ---------------   --------------     -------------

Net Loss                                         $     (247,450)  $      (563,336)  $     (806,711)    $  (1,099,089)
                                                 ==============   ===============   ==============     =============

Net Loss allocated:
   General Partners                              $       (2,474)  $        (5,633)  $       (8,067)    $     (10,991)
   Limited Partners                                    (244,976)         (557,703)        (798,644)       (1,088,098)
                                                 --------------   ---------------   --------------     -------------
                                                 $     (247,450)  $      (563,336)  $     (806,711)    $  (1,099,089)
                                                 ==============   ===============   ==============     =============
Net Loss per Limited Partner
   Unit (100,000 Units)                          $        (2.45)  $         (5.58)  $        (7.99)    $      (10.88)
                                                 ==============   ===============   ==============     =============
</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 (DEFICIENCY)
                   For the Six Months Ended September 30, 2004
                                   (Unaudited)


<TABLE>
<CAPTION>


                                                            Initial           Investor
                                            General        Limited            Limited
                                            Partners       Partners           Partners           Total
                                          -----------     -----------      -------------     -------------

<S>                                       <C>             <C>              <C>               <C>
Balance at March 31, 2004                 $  (871,297)    $     5,000      $   1,321,087     $     454,790

Net Loss                                       (8,067)              -           (798,644)         (806,711)
                                          -----------     -----------      -------------     -------------

Balance at September 30, 2004             $  (879,364)    $     5,000      $     522,443     $    (351,921)
                                          ===========     ===========      =============     =============
</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, 2004 and 2003
                                   (Unaudited)


<TABLE>
<CAPTION>


                                                                                 2004              2003
                                                                           -------------       -------------

<S>                                                                        <C>                 <C>
Net cash used for operating activities                                     $     (23,411)      $    (586,292)

Net cash provided by investing activities                                        115,952             132,246

Net cash used for financing activities                                          (101,564)                  -
                                                                           -------------       -------------

Net decrease in cash and cash equivalents                                         (9,023)           (454,046)

Cash and cash equivalents, beginning                                             366,997             933,675
                                                                           -------------       -------------

Cash and cash equivalents, ending                                          $     357,974       $     479,629
                                                                           =============       =============

Supplemental disclosure of cash flow information:
   Cash paid for interest                                                  $       3,000       $       3,000
                                                                           =============       =============
</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-QSB 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-KSB for the year ended March 31, 2004. 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, 2004 and 2003.

1.   Investments in Local Limited Partnerships

The Partnership has limited partnership interests in thirty-four Local Limited
Partnerships which were organized for the purpose of owning and operating
multi-family housing complexes, all of which are government-assisted. The
Partnership's ownership interest in each Local Limited Partnership is 99%,
except for Granite V where the Partnership's ownership interest is 97%. The
Partnership may have negotiated or may negotiate options with the local general
partners to purchase or sell the Partnership's interests in the Local Limited
Partnerships at the end of the tax credit compliance period at nominal prices.
In the event that Properties are sold to third parties, proceeds will be
distributed according to the terms of each Local Limited Partnership agreement.

The following is a summary of investments in Local Limited Partnerships at
September 30, 2004:
<TABLE>
<CAPTION>

Capital contributions and advances paid to Local Limited Partnerships
<S>                                                                                              <C>
   and purchase price paid to withdrawing partners of Local Limited Partnerships                 $  52,976,778

Cumulative equity in losses of Local Limited Partnerships
   (excluding cumulative unrecognized losses of $56,101,122)                                       (42,818,315)

Cumulative cash distributions received from Local Limited Partnerships                              (4,831,960)
                                                                                                 ---------------

Investments in Local Limited Partnerships before adjustments                                         5,326,503

Excess investment costs over the underlying assets acquired:

   Acquisition fees and expenses                                                                     4,582,799

   Cumulative amortization of acquisition fees and expenses                                         (1,528,525)
                                                                                                 -------------

Investments in Local Limited Partnerships before impairment allowance                                8,380,777

Impairment allowance on investments in Local Limited Partnerships                                   (4,282,214)
                                                                                                 ---------------

Investments in Local Limited Partnerships                                                        $   4,098,563
                                                                                                 =============
</TABLE>


For the six months ended September 30, 2004, the Partnership advanced $63,690 to
one of the Local Limited Partnerships, all of which was impaired. The
Partnership has recorded an impairment allowance for its investments in certain
Local Limited Partnerships in order to appropriately reflect the estimated net
realizable value of these investments.


<PAGE>

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


                  Notes to the Financial Statements (continued)
                                   (Unaudited)



1. Investments in Local Limited Partnerships (continued)

The Partnership's share of the net losses of the Local Limited Partnerships for
the six months ended September 30, 2004 is $3,169,969. For the six months ended
September 30, 2004, the Partnership has not recognized $2,743,626 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. Previously unrecognized losses of $28,596 were included in
losses recognized in the six months ended September 30, 2004.

The Partnership's investment in one Local Limited Partnerships was sold during
the period ended September 30, 2004, resulting in a gain of $75,000. Proceeds
relating to this transaction in the amount of $75,000 remain outstanding at
September 30, 2004.



<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
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.

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 Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. 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. 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 and is included in "Other Revenue" in the
accompanying financial statements.

The Partnership has implemented policies and practices for assessing potential
impairment of its investments in Local Limited Partnerships. Real estate experts
analyze the investments to determine if impairment indicators exist. If so, the
investment is analyzed to consider the Partnership's ability to recover its
carrying value. If an other than temporary impairment in carrying value exists,
a provision to write down the asset to fair value will be recorded in the
Partnership's financial statements.

Liquidity and Capital Resources

The Partnership had a decrease in cash and cash equivalents of $9,023 for the
six months ended September 30, 2004. This decrease is attributable to repayment
of a note payable, cash used for operations and advances paid to Local Limited
Partnerships, offset by cash distributions received from 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, 2004, $357,974 of cash
and cash equivalents has been designated as Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,192,000 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

<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 (continued)

$734,000 (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 Managing General Partner might deem it in its best
interest to voluntarily provide such funds in order to protect its investment.
As of September 30, 2004, the Partnership has advanced approximately $2,139,000
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 $2,208,000 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, at September 30, 2004, 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, 2004.

Results of Operations

Three Month Period

For the three months ended September 30, 2004, the Partnership's operations
resulted in a net loss of $247,450 as compared to a net loss of $563,336 for the
same period in 2003. The decrease in net loss is due to a decrease in equity in
losses of Local Limited Partnerships, an increase in gain on sale of investments
in Local Limited Partnerships and an increase in other income, which is
partially offset by an increase in general and administrative expenses. The
decrease in equity in losses of Local Limited Partnerships is primarily due to
the Partnership not recognizing losses relating to Local Limited Partnerships
where cumulative equity in losses and cumulative distributions have exceeded its
total investment. The increase in gain on sale of investments in Local Limited
Partnerships is due to the sale of a Local Limited Partnership during the 2004
period. The increase in other income is due to an increase in distributions from
Local Limited Partnerships with carrying values of zero. The increase in general
and administrative expenses is due to an increase in charges due to an affiliate
of the General Partner for operational and administrative expenses necessary for
the operation of the Partnerships.

Six Month Period

For the six months ended September 30, 2004, the Partnership's operations
resulted in a net loss of $806,711 as compared to a net loss of $1,099,089 for
the same period in 2003. The decrease in net loss is due to a decrease in equity
in losses of Local Limited Partnerships, an increase in gain on sale of
investments in Local Limited Partnerships and an increase in other income, which
is partially offset by an increase in general and administrative expenses. The
decrease in equity in losses of Local Limited Partnerships is primarily due to
the Partnership not recognizing losses relating to Local Limited Partnerships
where cumulative equity in losses and cumulative distributions have exceeded its
total investment. The increase in gain on sale of investments in Local Limited
Partnerships is due to the sale of a Local Limited Partnership during the 2004
period. The increase in other income is due to an increase in distributions from
Local Limited Partnerships with carrying values of zero. The increase in general
and administrative expenses is due to an increase in charges due to an affiliate
of the General Partner for operational and administrative expenses necessary for
the operation of the 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)

Portfolio Update

The Partnership's investment portfolio consists of limited partnership interests
in thirty-four Local Limited Partnerships, each of which owns and operates a
multi-family apartment complex and each of which has generated Tax Credits.
Since inception, the Partnership has generated Tax Credits, net of recapture, of
approximately $1,340 per Limited Partner Unit, with an immaterial amount of Tax
Credits expected to be generated during 2004. The aggregate amount of net Tax
Credits generated by the Partnership is consistent with the objective specified
in the Partnership's prospectus.

Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 years from the
date the property is completed. Failure to do so would result in recapture of a
portion of the Property's Tax Credits. Beginning in 2003 and continuing through
2006, the Compliance Period of the thirty-four Properties in which the
Partnership has an interest will expire. The Managing General Partner has
negotiated agreements that will ultimately allow the Partnership to dispose of
its interest in fourteen Local Limited Partnerships. It is unlikely that the
disposition of any of these Local Limited Partnership interests will generate
any material cash distributions to the Partnership. Eleven of the Properties in
which the Partnership had an investment were sold during the year ended March
31, 2004.

The Managing General Partner will continue to pursue the disposition of the
Partnership's remaining Local Limited Partnership interests. It is unlikely that
the Managing General Partner's efforts will result in the Partnership disposing
of all of its remaining Local Limited Partnership interests concurrently with
the expiration of each Property's Compliance Period. 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.

On August 24, 2004, the Partnership and seven affiliates of the General Partners
(collectively, the "Partnerships"), and their general partners commenced
litigation against Everest Housing Investors 2, LLC and three other
Everest-related entities in Massachusetts state court, seeking a declaratory
judgment that certain materials the Everest entities sought to inspect are not
"books and records" of the Partnerships, and that the Everest entities are in
any case not entitled to inspect said information under applicable partnership
agreements, partnership law or otherwise. On October 7, 2004, the Everest
entities filed an answer and counterclaimed against the Partnerships and their
general partners, claiming that they breached applicable partnership agreements,
partnership law and their fiduciary duties to the Everest entities by failing to
make the purported "books and records" available. The defendants maintain that
Everest is not entitled to review the materials requested and/or use the
materials in secondary market transactions because, among other things, (i) the
materials requested are not "books and records" of the Partnerships, as that
term is defined in the relevant Partnership Agreements, (ii) Everest does not
seek to review them for a proper purpose, and (iii) that selective disclosure of
the information to Everest would give it an unfair informational advantage in
secondary market transactions, and could potentially violate federal and/or
state securities laws. Because of the preliminary nature of the Massachusetts
litigation, including but not limited to the fact that no discovery has taken
place, no estimate of a potential outcome can be made at this time.

Property Discussions

A majority of the Properties in which the Partnership has an interest have
stabilized operations and operate above break-even. A few Properties generate
cash flow deficits that the Local General Partners of those Properties fund
through project expense loans, subordinated loans or operating escrows. However,
some Properties have had persistent operating difficulties that could either: i)
have an adverse impact on the Partnership's liquidity; ii) result in their
foreclosure; or iii) result in the Managing General Partner deeming it
appropriate for the Partnership to dispose of its interest in the Local Limited
Partnership prior to the expiration of the Compliance Period. Also, the Managing
General Partner, in the normal course of the Partnership's business, may arrange
for the future disposition of its interest in certain Local Limited
Partnerships. The following Property discussions focus only on such Properties.
<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)

As previously reported, the Managing General Partner negotiated an agreement
with an unaffiliated entity to have the ability to transfer the Partnership's
interest to the unaffiliated entity or its designee with respect to the
following Properties: Briarwood II, located in Lake Havasua, Arizona, Eaglewood,
located in Covington, Tennessee, Fulton, located in Fulton, Kentucky, Lexington
Civic, located in Lexington, Tennessee, Kirkendall Heights, located in
Ellsworth, Kansas and Poplar Village, located in Cumberland, Kentucky. Although
these Properties do not share a common Local General Partner, they are all Rural
Housing Section 515 ("FMHA") properties. The Managing General Partner has the
right to put its interest in any of the Properties at any time in exchange for a
Contingent Note that grants the Partnership 50% of all future net cash receipts
from such Local Limited Partnership interest. Effective January 2, 2004, the
Managing General Partner exercised the Briarwood II put option. The Partnership
no longer has an interest in this Property. This sale resulted in taxable income
projected to be approximately $316,000, or $3 per Unit.

As previously reported, the Managing General Partner negotiated an agreement
with the Local General Partner to have the ability to transfer the Partnership's
interest to the Local General Partner with respect to the following Properties:
Ashton Heights, located in Bolivar, Missouri, Bentley Hill, located in Syracuse,
Kansas, Brownsville, located in Brownsville, Tennessee, Cedar Tree, located in
Billings, Missouri, Garden Plain, located in Garden Plain, Kansas, Horseshoe
Bend, located in Horseshoe Bend, Arizona, Longview, located in Humboldt, Kansas,
Pearl Place, located in Rossville, Kansas, Ponca Manor, located in Satanta,
Kansas, Smithville, located in Smithville, Missouri and Sunnyhill Villa, located
in Wayne, Nebraska. These Properties share a common Local General Partner and
they are all Rural Housing Section 515 ("FMHA") properties. The Managing General
Partner has the right to put its interest in any of the Properties for $5,000
subsequent to the expiration of each Property's Compliance Period. The
Compliance Period expires on or before December 31, 2004 for all eleven of these
Properties. Effective January 2, 2004, the Managing General Partner exercised
the put options on Bentley Hill, Brownsville, Cedar Tree, Garden Plain,
Horseshoe Bend, Longview, Smithville and Sunnyhill Villa. The Partnership
received a total of $40,000 for its interests in these eight Local Limited
Partnerships. The Partnership no longer has an interest in these eight
Properties. The Managing General Partner, in accordance with and as permitted by
the Partnership Agreement, retained the entire amount of net proceeds in
Reserves. These sales resulted in taxable income projected to be approximately
$1,430,000, or $14 per Unit.

As previously reported, the Managing General Partner reached an agreement to
transfer the Partnership's interest in Aurora East Apartments, located in
Denver, Colorado, to the Local General Partner of the Property. On January 2,
2003, the Managing General Partner transferred its interest in the Property to
the Local General Partner for $150,000. The Partnership no longer has an
interest in this Property. The Managing General Partner, in accordance with and
as permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The sale resulted in taxable income of approximately
$880,000, or $9 per Unit.

As previously reported, during the third quarter of 2002, the Massachusetts
Housing Finance Agency ("MHFA") issued a report that gave Granite V, located in
Boston, Massachusetts, a below average physical condition rating. Site
management addressed the issues listed in the report, and MHFA subsequently
rated the Property in satisfactory condition. Unfortunately, current replacement
reserve levels are inadequate to meet future needs. During the first quarter of
2003, the Managing General Partner approved a transfer of the Local General
Partner interest to a new Local General Partner. Since the Property's mortgage,
which accrues interest at a rate of 12.2%, may be prepaid without a premium
beginning in 2002, the new Local General Partner refinanced the Property's first
mortgage in December 2003 by obtaining an eighteen-month loan that reduced the
interest rate from 12% to 6.5%, and provided proceeds to pay outstanding
obligations. To pay down current obligations, the Local General Partner also
liquidated the replacement reserves account held by the previous lender. The
Compliance Period for the Property ended in 2003, and the Managing General
Partner has begun to identify possible disposition options for the Partnership's
interest in the Property.

<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)

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 have commenced
discussions regarding the options available to improve operations at, or dispose
of the Properties.

As previously reported, several years ago Willow Lake, located in Kansas City,
Missouri, entered into a loan workout agreement that allowed the Property to
defer the payment of some of the interest on the loan. The loan workout
agreement expired on May 31, 2001, and the Property was unable to make the
payment required under the loan workout agreement of approximately $227,000.
After a long negotiating period, a mutually acceptable workout plan was agreed
upon, whereby the Property used its Operating Deficit Escrow of approximately
$75,000 plus approximately $78,000 from its Replacement Reserve Account to pay
down the loan. In addition, the Property was required to make monthly payments
on the loan until the outstanding balance was fully repaid in September 2003.
The Managing General Partner advanced Partnership Reserves to the Property in
order to make the required payments. Occupancy at the Property has remained
depressed during recent months due to a slow economy, the property's inferior
appearance compared to new affordable housing developments in the area and an
excess of supply over demand for rental units. Rental rates are declining as a
result. A new management agent took over in March 2003.

As previously reported, during 1994, the Local General Partner at Admiral Court,
located in Philadelphia, Pennsylvania, transferred its interest in the Local
Limited Partnership. The IRS subsequently conducted a compliance audit at the
Property and took the position that the Property is subject to recapture due to
non-compliance issues. The Managing General Partner disagrees with the IRS and
is working to resolve the matter. In the opinion of the Managing General
Partner, there is a risk that the Local Limited Partnership and, consequently,
the Partnership could suffer significant Tax Credit recapture. However, it is
not possible to quantify the potential amount at this time. The Property's Tax
Credit stream ended in 1999. Further, the Property suffered from poor location
and security issues. Vandalism caused an increase in maintenance and repair
expenses and negatively affected the Property's occupancy levels and tenant
profile, causing working capital and debt service coverage to drop below
appropriate levels. In 2003, the Managing General Partner and the Local General
Partner began to pursue disposition options of the Partnership's interest in the
Property. In the fall of 2003, a put option agreement was entered into that
allowed the Partnership to transfer its interest in the Local Partnership to the
Local General Partner after the expiration of the Compliance Period on December
31, 2003. On September 21, 2004, the Property was sold and the Partnership
received $75,000 in sales proceeds. The Partnership no longer has an interest in
this Local Limited Partnership. The Managing General Partner, in accordance with
and as permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The sale resulted in taxable income of approximately
$468,000, or $5 per Unit.

As previously reported, increased competition for Georgetown II, located in
Georgetown, Delaware, has negatively impacted the Property's operations.
Although the Property has maintained a high level of occupancy, rental rates
have stagnated while expenses have continued to increase. In an effort to reduce
fixed expenses to improve cash flow, the Local General Partner refinanced the
Property's first mortgage during the first quarter 2004, reducing the interest
rate from 8% to 6%, which should significantly improve the Property's future
operating performance. The Property no longer generates Tax Credits and the
Compliance Period expires on December 31, 2004. In 2003, the non-profit
affiliate of the state housing finance agency that holds the Property's
long-term ground lease offered to transfer the land at little cost to the
Partnership. The Managing General Partner gave its consent to the transfer and
concurrently executed a Put Agreement for the Partnership's interest in the
Property to the Local General Partner.


<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 Put Agreement gives the Partnership the right to transfer its interest to
the Local General Partner. It is unlikely the Partnership will transfer its
interest until the end of the Compliance Period.

As previously reported, operations at Westwood Manor, located in Flint,
Michigan, have suffered in recent quarters. Poor site management caused
occupancy, deferred maintenance and curb appeal issues. The Partnership also
advanced $50,000 from Reserves to address the deferred maintenance issues at the
Property during 2001. The advance was to be repaid through operations, if
available, with the Local General Partner obligated to pay back 50% of the
remaining balance should the entire amount of the advance not be repaid by
December 31, 2001. The Property did not generate sufficient cash from operations
to repay any of the Partnership's advances. The Partnership has not yet made a
demand from the Local General Partner to meet his obligation to repay 50% of the
advance. However, the Managing General Partner and the Local General Partner
have reached agreement on an exit strategy on this Property. The Local General
Partner received approval for a refinancing of the Property from HUD and the
refinanced mortgage was closed on July 31, 2003. The Managing General Partner,
in providing its approval, of the refinancing received agreement from the Local
General Partner to a put option whereby the Partnership can dispose of its
interest in the Property anytime after December 31, 2003 when the Compliance
Period expires. Part of the agreement also includes repayment of the
Partnership's $50,000 loan.

As previously reported, during 1995, the Kyle Hotel, located in Temple, Texas,
defaulted on its mortgage and the lender placed the Local Limited Partnership in
bankruptcy. Under the subsequent reorganization, the Local General Partner was
replaced by an affiliate of the Managing General Partner, and the Partnership
purchased the outstanding debt on the Property. The Property makes mortgage
payments in the amount of available cash flow to the Partnership. The property
has consistently enjoyed high occupancy over the past several months. However,
commercial rental revenue has been eliminated by the inability to lease the
commercial space due to its odd configuration. The Managing General Partner will
continue in its attempts to dispose of the Partnership's interest in the
Property.

As previously reported, South Holyoke, located in Holyoke, Massachusetts,
received a subsidy under the State Housing Assistance Rental Program ("SHARP"),
which was an important part of its annual income. As of March 1, 2003, MHFA
cancelled SHARP payments for the rest of the State's fiscal year (June 30,
2003). The State did not reinstate payments for FY 2004 (July 1, 2003 to June
30, 2004). Properties unable to make full debt service payments were declared in
default by MHFA. Due to the existing operating deficits and the dependence on
these subsidies, South Holyoke was declared in default on its mortgage
obligations. The Local General Partner of South Holyoke negotiated an agreement
with MHFA to restructure the SHARP debt as well as the mortgage on the Property.
As part of the restructuring, the Partnership contributed additional capital of
$100,000 to the Property in exchange for the right to put its interest to the
Local General Partner at the end of the Property's Compliance Period, January 1,
2004. Effective January 4, 2004, the Managing General Partner exercised the put
option. The Partnership no longer has an interest in this Property. This sale
resulted in taxable income projected to be approximately $5,329,000, or $53 per
Unit.

As previously reported, operations at Breckenridge, located in Duluth, Georgia,
which historically operated at a deficit, slightly improved during 2002 as a
result of ongoing capital improvements made to the Property. However, the
Property continued to experience occupancy fluctuations. Based upon the
Property's persistent operating challenges, the Managing General Partner
expressed concerns regarding the long-term viability of the Property and
believed it was in the best interest of the Partnership to dispose of its
interest. Effective December 31, 2000, the Managing General Partner, on behalf
of the Partnership, entered into an agreement to transfer the Partnership's
interest in the Local Limited Partnership to an unaffiliated entity. The
agreement included provisions to minimize the risk of recapture. As of December
31, 2002, the Partnership had transferred 99% its interest in the Property, and
on January 3, 2003 the Partnership transferred its remaining 1% interest in the
Property. The Partnership no longer has an interest in this Property. This sale
resulted in a taxable loss of approximately $1,322,000, or $13 per Unit.


<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)

As previously reported, due to operating deficits in 2002 and 2003 at Tucson
Trails I and Tucson Trails II, located in Madison, Wisconsin, the Local General
Partner proposed a refinancing of the Properties. At the same time, the same
Local General Partner proposed a refinancing of the first mortgages of two other
Properties, Elver Park II and Elver Park III, in which the Partnership had an
interest but had enjoyed stable operations for the last several quarters. The
Managing General Partner agreed to the refinancing of all four Properties and
all four Properties closed on their new first mortgages in November 2003 with
the Partnership receiving a total of $954,098 in cash from refinancing proceeds.
The Managing General Partner and the Local General Partner also entered into a
call and put option whereby the Local General Partner received a call option at
the end of the Compliance Period for a nominal amount. If the call is not
exercised within a 6-month period, the Partnership has the option to put its
interest to the Local General Partner. The expiration of the Compliance Period
will be no later than December 31, 2004 for any of the four Properties.

As previously reported, the Compliance Period for The Colony, located in
Columbia, South Carolina ended on December 31, 2003. In anticipation of that,
the Managing General Partner and the Local General Partner executed a put option
agreement that would allow the Partnership to transfer its interest in the Local
Partnership to the Local General Partner for $1. The Managing General Partner
determined that there was no likelihood of any realizable cash distributable to
the Partnership from a sale of the property. As a result, on January 2, 2004,
the put option was exercised and the Partnership transferred its entire interest
in the Local Partnership to the Local General Partner for $1. The Partnership no
longer has an interest in this property. This sale resulted in taxable income
projected to be approximately $1,403,000, or $14 per Unit.

Fox Run, located in Victoria, Texas experienced operating deficits in 2003 and
the first half of 2004 due to decreased revenues and increased expenses. The
Property also suffered from deferred maintenance and failed two consecutive HUD
physical inspections in February and July 2004. In addition, the property
defaulted on its HUD-insured mortgage loan in December 2003. Since the Property
generated its last Tax Credits in 1999, in order to minimize risk to the
Partnership, in late August 2004 the Managing General Partner decided to
transfer the Partnership's interest to a third party in exchange for a
Contingent Note that grants the Partnership 50% of all future net cash receipts
from such Local Limited Partnership interest. The Partnership no longer has an
interest in this property. This sale resulted in taxable income projected to be
approximately $1,131,000, or $11 per Unit.

In 2003, the Local General Partner of El Jardin, located in Davie, Florida,
expressed its desire to sell the Property to a third party buyer. In April 2003,
a realtor was hired to appraise the Property. In June 2004, the Local General
Partner received an offer from a third party buyer that was subsequently
increased as a result of an updated market valuation. It is anticipated that a
sale of the property will occur prior to December 31, 2004.




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

                             CONTROLS AND PROCEDURES



Controls and Procedures

Based on the Partnership's evaluation as of the end of the period covered by
this report, the Partnership's executive vice president has concluded that the
Partnership's disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that the Partnership files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

There have been no significant changes in the Partnership's internal controls or
in other factors that could significantly affect those controls subsequent to
the date of their evaluation.


<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 Jenny Netzer pursuant to section 302
                           of the Sarbanes-Oxley Act of 2002

                    32.1   Certification of Jenny Netzer 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, 2004



<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 12, 2004                  BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                          CREDITS L.P. III

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




                                                  /s/Jenny Netzer
                                                 Jenny Netzer
                                                 Executive Vice President
                                                 MMA Financial, LLC


<PAGE>