August 13, 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 June 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/ Veronica J Curioso
Veronica J.Curioso
Assistant Controller





QH3-Q1.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 Actof1934

(Mark One)

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

For the quarterly period ended June 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      June 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 - June 30, 1997 (Unaudited)
           and March 31, 1997                                              1

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

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

         Combined Statements of Cash Flows (Unaudited) -  For the
           Three Months Ended June 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                             10

PART II - OTHER INFORMATION

Items 1-6                                                                  13

SIGNATURE                                                                  14



<PAGE>

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)
<TABLE>

                                                         
            COMBINED BALANCE SHEETS - June 30, 1997 and March 31, 1997
<CAPTION>


                                                                      June 30,                March 31,
                                                                        1997                    1997
                                                                     (Unaudited)
Assets

<S>                                                                  <C>                    <C>         
Cash and cash equivalents                                            $    422,420           $    379,614
Marketable securities, at fair value                                      406,598                331,319
Investments in Local Limited Partnerships, net (Note 1)                23,028,149             23,983,675
Accounts receivable, net                                                   59,737                175,669
Interest receivable                                                         5,951                 17,607
Prepaid expenses                                                           18,219                 40,019
Tenant security deposits                                                   69,749                 66,439
Replacement reserves                                                      214,681                210,045
Rental property at cost, net of accumulated
   depreciation                                                        17,693,122             17,884,234
Deferred acquisition fees escrow                                          337,500                337,500
Deferred expenses, net                                                    228,786                235,339
Other assets                                                              264,701                130,130
                                                                     ------------           ------------
     Total Assets                                                    $ 42,749,613           $ 43,791,590
                                                                     ============           ============

Liabilities and Partners' Equity

Accounts payable to affiliates                                       $  1,283,651           $  1,193,182
Accounts payable and accrued expenses                                     622,613                611,515
Interest payable                                                          444,351                377,295
Note payable, affiliate                                                   573,822                514,968
Security deposits payable                                                  82,626                 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                                                 11,721,805             11,754,415
                                                                     ------------           ------------
     Total Liabilities                                                 15,589,414             15,393,975
                                                                     ------------           ------------

Minority interest in Local Limited Partnerships                         1,057,911              1,053,122
                                                                     ------------           ------------

General, Initial and Investor Limited Partners' Equity                 26,102,293             27,346,440
Net unrealized losses on marketable securities                                 (5)                (1,947)
                                                                     ------------           ------------
     Total Partners' Equity                                            26,102,288             27,344,493
                                                                     ------------           ------------
     Total Liabilities and Partners' Equity                          $ 42,749,613           $ 43,791,590
                                                                     ============           ============
</TABLE>

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

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)
<TABLE>


                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                For the Three Months Ended June 30, 1997 and 1996
<CAPTION>

                                                                         1997                   1996
                                                                     -------------          --------
Revenue:
<S>                                                                  <C>                    <C>         
    Rental                                                           $     607,046          $    451,156
    Investment                                                               9,729                59,519
    Other                                                                  118,465                45,065
                                                                     -------------          ------------
      Total Revenue                                                        735,240               555,740
                                                                     -------------          ------------

Expenses:
    Asset management fees, related party                                   109,095               113,861
    General and administrative (includes
      reimbursements to affiliates of $58,855 and
      $45,344 in 1997 and 1996, respectively)                              122,829                80,382
    Bad debt                                                                11,836                     -
    Property management fees                                                42,225                22,133
    Rental operations, exclusive of depreciation                           459,904               277,122
    Interest                                                               247,776               227,403
    Depreciation                                                           191,112               113,217
    Amortization                                                            46,298                48,064
                                                                     -------------          ------------
      Total Expenses                                                     1,231,075               882,182
                                                                     -------------          ------------

Loss before equity in losses of
    Local Limited Partnerships                                            (495,835)             (326,442)

Equity in losses of Local Limited Partnerships                            (751,196)             (739,798)

Minority interest in losses of
    Local Limited Partnerships                                               2,884                 2,236
                                                                     -------------          ------------


Net Loss                                                             $  (1,244,147)         $ (1,064,004)
                                                                     =============          ============

Net Loss allocated:
    To General Partners                                              $     (12,441)         $    (10,640)
    To Limited Partners                                                 (1,231,706)           (1,053,364)
                                                                     -------------          ------------
                                                                     $  (1,244,147)         $ (1,064,004)
                                                                     =============          ============

Net Loss per Limited Partnership Unit
    (100,000 Units)                                                  $     (12.32)          $     (10.53)
                                                                     ============           ============
</TABLE>

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



<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)
<TABLE>


              STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                                   (Unaudited)
                    For the Three Months Ended June 30, 1997
<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               -             -                   -        1,942              1,942

Net Loss                                 (12,441)            -          (1,231,706)           -         (1,244,147)
                                      ----------       -------        ------------    ---------      -------------

Balance at June 30, 1997              $ (614,822)      $ 5,000        $ 26,712,115    $      (5)     $  26,102,288
                                      ==========       =======        ============    =========      =============
</TABLE>

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


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)

<TABLE>

                        COMBINED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                For the Three Months Ended June 30, 1997 and 1996
<CAPTION>


                                                                          1997                     1996
                                                                      -------------             -------

<S>                                                                   <C>                      <C>          
Net cash used for operating activities                                $   (143,987)            $    (81,007)
                                                                      ------------             ------------

Cash flows from investing activities:
    Advances to affiliates                                                 (57,497)                       -
    Purchases of marketable securities                                    (124,573)                       -
    Proceeds from sales and maturities of
      marketable securities                                                 51,439                   26,411
    Cash distributions received from Local
      Limited Partnerships                                                 179,290                  216,126
    Additions to fixed assets                                                    -                     (670)
    Deposits to replacement reserves                                        (4,636)                 (29,373)
                                                                      ------------             ------------
       Net cash provided by investing activities                            44,023                  212,494
                                                                      ------------             ------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                    (32,610)                 (71,435)
Advances from affiliate                                                    116,526                   13,153
    Advances on notes payable, affiliate                                    58,854                        -
    Payments to developer                                                        -                   (5,172)
    Repayment of notes receivable, affiliate                                     -                   13,317
                                                                      ------------             ------------
       Net cash provided by (used for) financing activities                142,770                  (50,137)
                                                                      ------------             ------------

Net increase in cash and cash equivalents                                   42,806                   81,350

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

Cash and cash equivalents, ending                                     $    422,420             $    349,390
                                                                      ============             ============
</TABLE>


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


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)
                                                        
                   Notes to the Combined Financial Statements
                                   (Unaudited)

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

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.
<TABLE>

The following is a summary of Investments in Local Limited  Partnerships at June
30, 1997, excluding the Combined Entities:
<CAPTION>

<S>                                                                                            <C>
Capital contributions to Local Limited Partnerships and purchase
    price paid to withdrawing partners of Local Limited Partnerships                           $  60,012,604

Cumulative equity in loss of Local Limited Partnerships (excluding
   cumulative unrecognized losses of $22,165,501)                                                (38,488,460)

Cumulative cash distributions received from Local Limited Partnerships                            (2,011,264)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       19,512,880

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   6,455,925

   Accumulated amortization of acquisition fees and expenses                                      (1,305,656)
                                                                                               -------------

Investments in Local Limited Partnerships                                                         24,663,149

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------

                                                                                               $  23,028,149
</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 three months ended June 30, 1997 is
$1,770,747.  For the three months ended June 30, 1997, the  Partnership  has not
recognized  $1,026,583  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.  Negotiations  between  the  Managing  General
Partner,  the Lender and  prospective  buyers  have  continued  through the past
quarter resulting in a revised  disposition plan for the remaining 8 properties.
The new plan will transfer  title to the remaining 8 properties to  unaffiliated
buyers.  If negotiations  continue as expected,  this transfer will occur during
the third 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.

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

                                 Balance Sheets
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined                           Combined
                                     L.P. III (A)        Entities (B)      Eliminations          (A)
Assets
<S>                                     <C>             <C>               <C>               <C>         
Cash and cash equivalents               $    308,781    $     113,639     $          -      $    422,420
Marketable securities, at fair value         406,598                -                -           406,598
Investments in Local Limited
   Partnerships, net                      25,101,232                -       (2,073,083)       23,028,149
Accounts receivable, net                     826,867           59,737         (826,867)           59,737
Interest receivable                           23,507                -          (17,556)            5,951
Notes receivable                           1,423,253                -       (1,423,253)                -
Prepaid expenses                               7,077           11,142                -            18,219
Tenant security deposits                           -           69,749                -            69,749
Replacement reserves                               -          214,681                -           214,681
Rental property at cost, net of
   accumulated depreciation                        -       17,693,122                -        17,693,122
Deferred acquisition fees escrow             337,500                -                -           337,500
Deferred expenses, net                             -          228,786                -           228,786
Other assets                                       -          264,701                -           264,701
                                        ------------    -------------     ------------      ------------
     Total Assets                       $ 28,434,815    $  18,655,557     $ (4,340,759)     $ 42,749,613
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Accounts payable to affiliates          $  1,250,618    $     859,900     $   (826,867)     $  1,283,651
Accounts payable and accrued
   expenses                                  170,587          452,026                -           622,613
Interest payable                                   -          461,907          (17,556)          444,351
Notes payable, affiliate                     573,822                -                -           573,822
Security deposits payable                          -           82,626                -            82,626
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                             -       13,145,058       (1,423,253)       11,721,805
                                        ------------    -------------     ------------      ------------
     Total Liabilities                     2,332,527       15,524,563       (2,267,676)       15,589,414
                                        ------------    -------------     ------------      ------------

Minority interest in Local
   Limited Partnerships                            -                -        1,057,911         1,057,911
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       26,102,293        3,130,994       (3,130,994)       26,102,293
Net unrealized losses on marketable
   securities                                     (5)               -                -                (5)
                                        ------------    -------------     ------------      ------------
     Total Partners' Equity               26,102,288        3,130,994       (3,130,994)       26,102,288
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 28,434,815    $  18,655,557     $ (4,340,759)     $ 42,749,613
                                        ============    =============     ============      ============
</TABLE>

(A) As of June 30, 1997. 
(B) As of March 31, 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)
<TABLE>

                            Statements of Operations
<CAPTION>

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

Revenue:
<S>                                     <C>                <C>               <C>            <C>         
   Rental                               $          -       $   607,046       $        -     $    607,046
   Investment                                  8,025             1,704                -            9,729
   Other                                      69,735            48,730                -          118,465
                                        ------------       -----------       ----------     ------------
     Total Revenue                            77,760           657,480                -          735,240
                                        ------------       -----------       ----------     ------------

Expenses:
   Asset management fees, related party      109,095                 -                -          109,095
   General and administrative                122,829                 -                -          122,829
   Bad debt                                   11,836                 -                -           11,836
   Property management fees                        -            42,225                -           42,225
   Rental operations, exclusive
     of depreciation                               -           459,904                -          459,904
   Interest                                    1,500           246,276                -          247,776
   Depreciation                                    -           191,112                -          191,112
   Amortization                               39,745             6,553                -           46,298
                                        ------------       -----------       ----------     ------------
     Total Expenses                          285,005           946,070                -        1,231,075
                                        ------------       -----------       ----------     ------------

Loss before equity in losses of Local
   Limited Partnerships                     (207,245)         (288,590)               -         (495,835)

Equity in losses of Local Limited
   Partnerships                           (1,036,902)                -          285,706         (751,196)

Minority interest in losses of Local
   Limited Partnerships                            -                 -            2,884            2,884
                                        ------------       -----------       ----------     ------------

Net Loss                                $ (1,244,147)      $  (288,590)      $  288,590     $ (1,244,147)
                                        ============       ===========       ==========     ============

</TABLE>

(A) For the three  months  ended June 30,  1997.  
(B) For the three months ended March 31, 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)
<TABLE>

                            Statements of Cash Flows
<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                   $      (11,740)     $    (132,247)      $          -       $    (143,987)
                                          --------------      -------------       ------------       -------------

Cash flows from investing activities:
   Advances to affiliates                        (57,497)                 -                  -             (57,497)
   Purchases of marketable securities           (124,573)                 -                  -            (124,573)
   Proceeds from sales and maturities
     of marketable securities                     51,439                  -                  -              51,439
   Cash distributions received from
     Local Limited Partnerships                  179,290                  -                  -             179,290
   Deposits to replacement reserves                    -             (4,636)                 -              (4,636)
                                          --------------      -------------       ------------       -------------
Net cash provided by (used for)
   investing activities                           48,659             (4,636)                 -              44,023
                                          --------------      --------------      ------------       -------------

Cash flows from financing activities:
   Repayment of mortgage notes
      payable                                          -            (32,610)                 -             (32,610)
   Advances from affiliate                             -            116,526                  -             116,526
   Advances on notes payable,
     affiliate                                    58,854                  -                  -              58,854
                                          --------------      -------------       ------------       -------------
Net cash provided by
   financing activities                           58,854             83,916                  -             142,770
                                          --------------      -------------       ------------       -------------

Net increase (decrease) in cash
   and cash equivalents                           95,773            (52,967)                 -              42,806

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

Cash and cash equivalents,
   ending                                 $      308,781      $     113,639       $           -     $      422,420
                                          ==============      =============       =============     ==============
</TABLE>


(A) For the three  months  ended June 30,  1997.  
(B) For the three months ended March 31, 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 an increase in cash and
cash  equivalents of $42,806 from $379,614 at March 31, 1997 to $422,420 at June
30, 1997. This increase is attributable to net proceeds  received from sales and
maturities  of marketable  securities,  cash  distributions  received from Local
Limited  Partnerships  and advances from an  affiliate.  These are offset by the
repayment of mortgage notes payable and cash used for operations.

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  $1,513,000 have been paid from Reserves.
This amount includes  approximately  $1,229,000 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  $1,279,000 (net of paydowns) to purchase
the mortgage of a Local Limited  Partnership.  To date, the Partnership has used
approximately  $1,198,000 of operating funds to replenish Reserves.  At June 30,
1997, approximately $606,000 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 $1,229,000  noted above,  the  Partnership  has also advanced
approximately $678,000 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 June 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 three months ended June 30, 1997.

Results of Operations

For the three months ended June 30, 1997,  Partnership  operations resulted in a
net loss of  $1,244,147  as compared to a net loss of  $1,064,004  for the three
months ended June 30, 1996.  The increase in net loss is primarily  attributable
to an increase in rental  operations and  depreciation  offset by an increase in
rental revenue. These changes are the result of Breckenridge Creste's operations
being combined with the Partnership; this occurred on August 20, 1996.



<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   continue  to  improve  at  Pleasant   Plaza,   located  in  Malden,
Massachusetts, as a result of the 1995 SHARP subsidy restructuring.  However, 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.

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 a revised  disposition plan for the remaining 8 properties.
The new plan will transfer  title to the remaining 8 properties to  unaffiliated
buyers.  If negotiations  continue as expected,  this transfer will occur during
the third 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.

New on-site  management and rent increases have resulted in a marked improvement
in operations at Columbia.  Occupancy is stable at 100% as of June 30, 1996. The
Local General Partner  continues to work with the first mortgage lender and with
HUD to renegotiate the property's debt. As a result of improved operations,  the
property is now covering its debt service from funds from operations.

South  Holyoke,  located in  Holyoke,  Massachusetts,  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.  In addition,
additional SHARP subsidy from the local housing authority has been requested.


<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)

Waterfront  and  Shoreline,  two  Buffalo,  New  York  properties,  continue  to
experience  operating  difficulties  due  to  a  soft  rental  market,  deferred
maintenance and security issues.  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 usedto  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 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 bank on May 2,  1997  after  prolonged  operating
difficulties  resulting from low occupancy,  capital  rehabilitation needs and a
depressed local economy.  The Local General Partner and Managing General Partner
were  involved in lengthy  workout  negotiations  with HUD, but  ultimately  the
mortgages  for  these  properties  were  sold to a bank  in  HUD's  August  1996
non-performing loan auction. Although negotiations continued with the bank in an
attempt to prevent foreclosure, a workout was not achieved, and the foreclosures
occurred.  This transfer of title will result in a recapture tax in 1997 and the
allocation of taxable income which will be reported on the  investors'  1997 tax
return (filed in 1998). The Partnership's  carrying value of 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 high 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 June 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: August 13, 1997             BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                   CREDITS L.P. III

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




                                   /s/ Vinsent J. Constantini     
                                   Vincent J. Costantini
                                   Treasurer and Chief Financial Officer






<PAGE>