November 13, 1996




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 Edgar for Quarter Ended September 30, 1996
        File No. 01-18462


Dear Sir/Madam:

Pursuant to the  requirements of Rule 901(d) of Regulation S-T,  enclosed is one
copy of subject report.

Please  stamp and  return  the  enclosed  copy of this  letter  in the  enclosed
stamped, self-addressed envelope to acknowledge receipt of this filing.

Very truly yours,





/s/Marie D. Reynolds
Marie D. Reynolds
Assistant Controller





QH3-10Q2.DOC



<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

(Mark One)

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

For the quarterly period ended September 30, 1996

                                       OR

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


For the transition period from            to


For Quarter Ended   September 30, 1996      Commission file number  01-18462
                   -------------------                             ----------

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


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


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


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

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


<PAGE>

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

                                TABLE OF CONTENTS



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

Item 1.  Combined Financial Statements
         Combined Balance Sheets - September 30, 1996 (Unaudited)
           and March 31, 1996                                            1

         Combined Statements of Operations (Unaudited) - For the Three
           and Six Months Ended September 30, 1996 and 1995              2

         Combined Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Six Months Ended September 30, 1996     3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Six Months Ended September 30, 1996 and 1995                  4

         Notes to Combined Financial Statements (Unaudited)              5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                           14

PART II - OTHER INFORMATION

Items 1-6                                                                17

SIGNATURE                                                                18


<PAGE>

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
                                                         
          COMBINED BALANCE SHEETS - September 30, 1996 and March 31, 1996
<TABLE>
<CAPTION>

                                                                    September 30,             March 31,
                                                                        1996                    1996
                                                                     (Unaudited)
Assets
<S>                                                                <C>                      <C>    
Current assets:
   Cash and cash equivalents                                       $      257,152           $    268,040
   Accounts receivable, net                                                72,227                 40,757
   Interest receivable                                                      1,323                    740
   Prepaid expenses                                                        41,581                 35,930
   Tenant security deposits                                                63,223                 67,011
   Other current assets                                                    97,075                 53,656
                                                                   --------------           ------------
     Total current assets                                                 532,581                466,134

Investments in Local Limited Partnerships, net of
   reserve for valuation (Note 2)                                      27,924,994             30,216,554
Marketable securities, at fair value (Note 1)                             168,917                158,967
Replacement reserves                                                      154,349                168,335
Rental property at cost, net of accumulated
   depreciation                                                        12,611,729             12,818,153
Deferred acquisition fees escrow                                          450,000                450,000
Deferred expenses, net                                                     88,237                 93,479
                                                                   --------------           ------------
     Total Assets                                                  $   41,930,807           $ 44,371,622
                                                                   ==============           ============

Liabilities and Partners' Equity
Current liabilities:
   Accounts payable to affiliates                                  $      986,362           $    755,244
   Accounts payable and accrued expenses                                  451,808                471,328
   Current portion of mortgage notes payable                            4,196,171              4,261,276
   Interest payable                                                       356,847                186,550
   Note payable - affiliate                                                22,279                 22,279
   Security deposits payable                                               62,412                 60,229
                                                                   --------------           ------------
     Total current liabilities                                          6,075,879              5,756,906

Due to affiliate                                                          323,046                323,046
Deferred acquisition fees payable                                         450,000                450,000
Former general partner advances                                           200,000                200,000
Mortgage notes payable                                                  2,740,082              2,744,825
                                                                   --------------           ------------
     Total Liabilities                                                  9,789,007              9,474,777
                                                                   --------------           ------------

Minority interest in Local Limited Partnerships                           336,268                341,952
                                                                   --------------           ------------

General, Initial and Investor Limited Partners' Equity                 31,806,689             34,554,881
Net unrealized gains (losses) on marketable securities                     (1,157)                    12
                                                                   --------------           ------------
     Total Partners' Equity                                            31,805,532             34,554,893
                                                                   --------------           ------------
     Total Liabilities and Partners' Equity                        $   41,930,807           $ 44,371,622
                                                                   ==============           ============
</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)

                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)
           For the Three and Six Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>

                                                        Three Months Ended                  Six Months Ended
                                                  September 30,     September 30,     September 30,    September 30,
                                                      1996              1995              1996             1995
                                                 --------------   ---------------   --------------     --------

<S>                                               <C>              <C>               <C>               <C>    
Revenue:
   Rental                                         $    434,105     $     491,357     $    885,261      $    955,559
   Investment                                            7,843            30,929           67,362            59,445
   Other                                                82,874            21,593          127,939            39,040
                                                  ------------     -------------     ------------      ------------
     Total Revenue                                     524,822           543,879        1,080,562         1,054,044
                                                  ------------     -------------     ------------      ------------

Expenses:
   Asset management fees, related party                113,861           111,083          227,722           222,166
   General and administrative (includes
     reimbursements to affiliates of $45,344
     and $79,015 in 1996 and 1995, respectively)       115,933           265,227          196,315           570,928
   Rental operations, exclusive of depreciation        327,373           458,901          604,495           883,154
   Property management fees (Note 3)                    46,888              (806)          69,021            21,813
   Interest                                            221,306           173,460          448,709           343,344
   Depreciation                                        136,955            90,555          250,172           181,391
   Amortization                                         40,780            42,887           88,844            90,933
                                                  ------------     -------------     ------------      ------------
     Total Expenses                                  1,003,096         1,141,307        1,885,278         2,313,729
                                                  ------------     -------------     ------------      ------------

Loss before equity in losses of Local Limited
   Partnerships and extraordinary gain                (478,274)         (597,428)        (804,716)       (1,259,685)

Equity in losses of Local Limited Partnerships      (1,157,767)       (1,208,330)      (1,897,565)       (2,473,697)

Minority interest in losses of
   Local Limited Partnerships                            3,448             1,861            5,684             4,204
                                                  ------------     -------------     ------------      ------------

Net Loss before extraordinary item                  (1,632,593)       (1,803,897)      (2,696,597)       (3,729,178)

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

Net Loss                                          $ (1,684,188)    $  (1,803,897)    $ (2,748,192)     $ (3,729,178)
                                                  ============     =============     ============      ============

Net Loss allocated:
   To General Partners                            $    (16,842)    $     (18,039)    $    (27,482)     $    (37,292)
   To Limited Partners                              (1,667,346)       (1,785,858)      (2,720,710)       (3,691,886)
                                                  ------------     -------------     ------------      ------------
                                                  $ (1,684,188)    $  (1,803,897)    $ (2,748,192)     $ (3,729,178)
                                                  ============     =============     ============      ============

Net Loss before extraordinary item per
   Limited Partnership Unit (100,000 Units)       $     (16.17)    $     (17.86)     $     (26.70)     $    (36.92)
                                                  ============     ============      ============      ===========

Extraordinary item per Limited Partnership
   Unit (100,000 Units)                           $       (.51)    $           -     $       (.51)     $          -
                                                  ============     =============     ============      ============

Net Loss per Limited Partnership Unit
   (100,000 Units)                                $     (16.68)    $     (17.86)     $     (27.21)     $    (36.92)
                                                  ============     ============      ============      ===========
</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)

         COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                                   (Unaudited)
                   For the Six Months Ended September 30, 1996

<TABLE>
<CAPTION>
                                                                                         Net
                                                        Initial        Investor      Unrealized
                                        General         Limited         Limited         Gains
                                       Partners        Partners        Partners       (Losses)            Total

<S>                                  <C>              <C>            <C>              <C>            <C>           
Balance at March 31, 1996            $  (530,297)     $   5,000      $  35,080,178    $       12     $   34,554,893

Net change in unrealized
   losses on marketable
   securities available for sale               -              -                  -        (1,169)            (1,169)

Net Loss                                 (27,482)             -         (2,720,710)            -         (2,748,192)
                                     -----------      ---------      -------------    ----------     --------------

Balance at September 30, 1996        $  (557,779)     $   5,000      $  32,359,468    $   (1,157)    $   31,805,532
                                     ===========      =========      =============    ==========     ==============
</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)

                        COMBINED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
              For the Six Months Ended September 30, 1996 and 1995

<TABLE>
<CAPTION>
                                                                                 1996                    1995
                                                                           --------------           ---------

<S>                                                                        <C>                      <C>          
Net cash used for operating activities                                     $    (192,780)           $   (627,852)
                                                                           -------------            ------------

Cash flows from investing activities:
    Purchases of marketable securities                                           (49,376)             (1,409,525)
    Proceeds from sales and maturities
      of marketable securities                                                    39,238               2,918,867
    Cash distributions received from Local
      Limited Partnerships                                                       319,442                  53,505
    Capital contributions paid to Local Limited Partnerships                           -                 (43,321)
    Repayment of Local Limited Partnership's mortgage                                  -                (850,000)
    Additions to fixed assets                                                    (43,748)                 (8,378)
    Proceeds from insurance claim                                                      -                  33,819
                                                                           -------------            ------------
Net cash provided by investing activities                                        265,556                 694,967
                                                                           -------------            ------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                          (87,662)                (30,125)
    Repayment of notes receivable, affiliate                                      17,814                       -
    Payments to affiliate                                                        (13,816)                      -
                                                                           -------------            ------------
Net cash used for financing activities                                           (83,664)                (30,125)
                                                                           --------------           -------------

Net increase (decrease) in cash and cash equivalents                             (10,888)                 36,990

Cash and cash equivalents, beginning                                             268,040                 155,456
                                                                           -------------            ------------

Cash and cash equivalents, ending                                          $     257,152            $    192,446
                                                                           =============            ============
</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 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, 1996. 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 periods may not be indicative of
the results to be expected for the year.


1.   Marketable Securities

A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
                                                                   Gross               Gross
                                                                Unrealized          Unrealized           Fair
                                              Cost                 Gains              Losses             Value

<S>                                       <C>                  <C>                   <C>             <C>
Debt securities issued by
   the US Treasury                        $    64,361          $          -          $    (645)      $    63,716

Mortgage backed securities                     49,652                     -               (288)           49,364

Other debt securities                          56,061                    24               (248)           55,837
                                          -----------          ------------          ---------       -----------

Marketable Securities
   at September 30, 1996                  $   170,074          $         24          $  (1,181)      $   168,917
                                          ===========          ============          =========       ===========


Debt securities issued by
   the US Treasury                        $    39,392          $          -          $    (167)      $    39,225

Mortgage backed securities                     56,715                   583                  -            57,298

Other debt securities                          62,848                     -               (404)           62,444
                                          -----------          ------------          ---------       -----------

Marketable Securities
   at March 31, 1996                      $   158,955          $        583          $    (571)      $   158,967
                                          ===========          ============          =========       ===========
</TABLE>

The contractual maturities at September 30, 1996 are as follows:
<TABLE>
<CAPTION>
                                                                                                 Fair
                                                                                 Cost            Value

<S>                                                                          <C>             <C>        
Due in less than one year                                                    $    49,375     $    49,386
Due in one to five years                                                          71,047          70,167
Mortgage backed securities                                                        49,652          49,364
                                                                             -----------     -----------
                                                                             $   170,074     $   168,917
                                                                             ===========     ===========
</TABLE>

Actual maturities may differ from contractual  maturities because some borrowers
have the right to call or prepay  obligations.  Proceeds from the sales of fixed
maturity securities were approximately $39,000 and $2,919,000 for the six months
ended September 30, 1996 and 1995,  respectively.  Included in investment income
are gross gains of $1,590 and gross losses of $609 which were  realized on these
sales in the six months ended  September 30, 1996 and gross gains of $19,800 and
gross  losses of $14,996  which were  realized on these sales for the six months
ended September 30, 1995.


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

               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

2.   Investments in Local Limited Partnerships

The  Partnership  uses the equity  method to  account  for its  limited  partner
interests in  fifty-three  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% and 49%,  respectively.
Upon  dissolution,  proceeds will be  distributed  according to each  respective
partnership agreement.

The  following is a summary of  Investments  in Local  Limited  Partnerships at
September 30, 1996, excluding the Combined Entities:
<TABLE>
<CAPTION>

<S>                                                                                            <C> 
Capital contributions to Local Limited
   Partnerships and purchase price
   paid to withdrawing partners of
   Local Limited Partnerships                                                                  $  69,321,264

Cumulative equity in loss of Local Limited
   Partnerships (excluding cumulative
   unrecognized losses of $19,738,918)                                                           (43,973,321)

Cumulative cash distributions received from
   Local Limited Partnerships                                                                     (1,647,913)
                                                                                                 ------------ 
Investments in Local Limited Partnerships                                                           
   before adjustment                                                                              23,700,030

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   7,146,136

   Accumulated amortization of acquisition
   fees and expenses                                                                              (1,286,172)
                                                                                                -------------              
Investments in Local Limited Partnerships                                                         29,559,994

Reserve for valuation of investments in
   Local Limited Partnerships                                                                     (1,635,000)
                                                                                               --------------
                                                                                               $  27,924,994
                                                                                               ==============
</TABLE>

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

               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

2.   Investments in Local Limited Partnerships (continued)

Summarized  financial  information  from the  financial  statements of all Local
Limited Partnerships  accounted for on the equity method (excluding the Combined
Entities) in which the Partnership has invested, as of September 30, 1996, is as
follows:

Summarized Balance Sheets - June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>

Assets:
<S>                                                                                            <C>           
   Investment property, net                                                                    $  189,836,724
   Other assets, net                                                                               12,660,205
   Current assets                                                                                   7,358,327
                                                                                               --------------
       Total Assets                                                                            $  209,855,256
                                                                                               ==============

Liabilities and Partners' Equity:
   Mortgages payable, net of current portion                                                   $  172,015,795
   Other liabilities                                                                               18,009,731
   Current liabilities                                                                             16,401,853
                                                                                               --------------
       Total Liabilities                                                                          206,427,379

   Partners' Equity                                                                                 3,427,877
                                                                                               --------------
       Total Liabilities and Partners' Equity                                                  $  209,855,256
                                                                                               ==============


Summarized Income Statements - for the
Six Months ended June 30, 1996 (Unaudited)

Rental and other income                                                                        $  16,011,215
                                                                                               -------------

Expenses:
   Operating expenses                                                                              8,570,440
   Interest expense                                                                                7,856,539
   Depreciation and amortization                                                                   4,314,450
                                                                                               -------------
       Total expenses                                                                             20,741,429

Net Loss                                                                                       $  (4,730,214)
                                                                                               =============

Partnership's share of net loss                                                                $  (4,580,975)
                                                                                               =============
Other partners' share of net loss                                                              $    (149,239)
                                                                                               =============
</TABLE>

For the six months ended  September 30, 1996, the Partnership has not recognized
$2,692,459 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.

3.   Transactions with Affiliates

Boston  Financial  Property  Management  ("BFPM"),  an affiliate of the Managing
General  Partner,  currently  manages  Harbour  View,  a  property  in which the
Partnership  has  invested.  Included in  operating  expenses in the  summarized
income statements in Note 2 to the Combined  Financial  Statements is $24,567 of
fees earned by BFPM during the six months ended June 30, 1996.



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

               Notes to Combined Financial Statements (continued)
                                   (Unaudited)

3.   Transactions with Affiliates (continued)

BFPM is also the  management  agent of  Willow  Lake and The  Kyle.  BF  Lansing
Limited  Partnership  ("BF  Lansing"),  an  affiliate  of the  Managing  General
Partner,  currently  manages  Crestwood Place,  Eagle Nest Apartments,  One Main
Place, Pilot Point Apartments,  Hallet West Apartments,  Shady Shores Apartments
and Willowick  Apartments.  Included in the Combined Statements of Operations is
$61,821 of property  management  fees charged by BFPM and BF Lansing  during the
six months ended June 30, 1996.


4.   Liquidation of Interests in Local Limited Partnerships

As previously  reported,  the Managing  General Partner has transferred or is in
the process of transferring  all of the assets of six of the Texas  Partnerships
subject to their liabilities to unaffiliated entities. Crown Point, Godley Arms,
Glenbrook Apartments and Quail Run Apartments' transfers were effective February
21, 1996, February 21, 1996, June 7, 1996 and July 3, 1996, respectively. Two of
the properties  (Sherwood Arms and Lone Oak Apartments) are being transferred to
new owners  effective after September 30, 1996.  Since the new general  partners
had assumed the risks of ownership,  including funding operating  deficits prior
to March 31, 1996, the  Partnership's  investment in these six  partnerships has
been changed to the equity  method,  effective on the date that control of these
partnerships was assumed by the unaffiliated entities.

The Managing  General  Partner of the  Partnership  has executed an agreement to
sell the general partner  interests in the seven  remaining  Texas  Partnerships
(Crestwood Place, Eagle Nest Apartments, Hallet-West Apartments, One Main Place,
Pilot Point Apartments,  Shady Shores Apartments and Willowick Apartments) to an
unaffiliated buyer. These properties will be restructured into a new partnership
in which the Partnership  will retain a limited partner interest for a period of
time  expected to be about twelve  months.  During this period,  investors  will
continue to receive tax credits from these properties.




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

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

5.   Supplemental Combining Schedules

                                 Balance Sheets
<TABLE>
<CAPTION>
                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations
                                     L.P. III (A)        Entities (B)           (A)           Combined
Assets
<S>                                     <C>             <C>               <C>               <C>     
Current assets:
   Cash and cash equivalents            $    225,927    $      31,225     $          -      $    257,152
   Accounts receivable, net                  609,343           19,416         (556,532)           72,227
   Interest receivable                         1,323                -                -             1,323
   Notes receivable                        1,423,253                -       (1,423,253)                -
   Prepaid expenses                           11,324           30,257                -            41,581
   Tenant security deposits                        -           63,223                -            63,223
   Other current assets                            -           97,075                -            97,075
                                        ------------    -------------     ------------      ------------
     Total current assets                  2,271,170          241,196       (1,979,785)          532,581

Investments in Local Limited
   Partnerships, net of reserve
     for valuation                        30,449,120                -       (2,524,126)       27,924,994
Marketable securities, at fair value         168,917                -                -           168,917
Replacement reserves                               -          154,349                -           154,349
Rental property at cost, net of
   accumulated depreciation                        -       12,611,729                -        12,611,729
Deferred acquisition fees escrow             450,000                -                -           450,000
Deferred expenses, net                             -           88,237                -            88,237
                                        ------------    -------------     ------------      ------------
     Total Assets                       $ 33,339,207    $  13,095,511     $ (4,503,911)     $ 41,930,807
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Current liabilities:
   Accounts payable to affiliates       $    918,567    $     624,327     $   (556,532)     $    986,362
   Accounts payable and accrued
    expenses                                 142,829          308,979                -           451,808
   Current portion of mortgage
     notes payable                                 -        4,219,450          (23,279)        4,196,171
   Interest payable                                -          356,847                -           356,847
   Notes payable, affiliate                   22,279                -                -            22,279
   Security deposits payable                       -           62,412                -            62,412
                                        ------------    -------------     ------------      ------------
     Total current liabilities             1,083,675        5,572,015         (579,811)        6,075,879

Due to affiliate                                   -          323,046                -           323,046
Deferred acquisition fees payable            450,000                -                -           450,000
General partner advances                           -          200,000                -           200,000
Mortgage notes payable                             -        4,140,056       (1,399,974)        2,740,082
                                        ------------    -------------     ------------      ------------
     Total Liabilities                     1,533,675       10,235,117       (1,979,785)        9,789,007
                                        ------------    -------------     ------------      ------------
</TABLE>

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

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

5.   Supplemental Combining Schedules (continued)

                           Balance Sheets (continued)
<TABLE>
<CAPTION>
                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations
                                     L.P. III (A)        Entities (B)           (A)           Combined
<S>                                     <C>              <C>              <C>                <C>  
Minority interest in Local
   Limited Partnerships                            -                -          336,268           336,268
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       31,806,689        2,860,394       (2,860,394)       31,806,689
Net unrealized losses on marketable
   securities                                 (1,157)               -                -            (1,157)
                                        ------------    -------------     ------------      -------------
     Total Partners' Equity               31,805,532        2,860,394       (2,860,394)       31,805,532
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 33,339,207    $  13,095,511    $  (4,503,911)     $ 41,930,807
                                        ============    =============    =============      ============
</TABLE>


(A) As of September 30, 1996. 
(B) As of June 30, 1996.


<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

5.   Supplemental Combining Schedules (continued)

                            Statements of Operations
                  For the Three Months Ended September 30, 1996
<TABLE>
<CAPTION>
                                         Boston Financial
                                         Qualified Housing
                                            Tax Credits       Combined         Eliminations
                                           L.P. III (A)     Entities (B)            (A)              Combined

Revenue:
<S>                                       <C>                <C>                <C>              <C>          
   Rental                                 $           -      $   434,105        $        -       $     434,105
   Investment                                     7,269              574                 -               7,843
   Other                                         69,747           13,127                 -              82,874
                                          -------------      -----------        ----------       -------------
     Total Revenue                               77,016          447,806                 -             524,822
                                          -------------      -----------        ----------       -------------

Expenses:
   Asset management fees, related party         113,861                -                 -             113,861
   General and administrative                   115,933                -                 -             115,933
   Rental operations, exclusive
     of depreciation                                  -          327,373                 -             327,373
   Property management fees                           -           46,888                 -              46,888
   Interest                                       1,500          219,806                 -             221,306
   Depreciation                                       -          136,955                 -             136,955
   Amortization                                  38,159            2,621                 -              40,780
                                          -------------      -----------        ----------       -------------
     Total Expenses                             269,453          733,643                 -           1,003,096
                                          -------------      -----------        ----------       -------------

Loss before equity in losses of Local
   Limited Partnerships and
   extraordinary item                          (192,437)        (285,837)                -            (478,274)

Equity in losses of Local Limited
   Partnerships                              (1,491,751)               -           333,984          (1,157,767)

Minority interest in losses of Local
   Limited Partnerships                               -                -             3,448               3,448
                                          -------------      -----------        ----------       -------------

Net loss before extraordinary item           (1,684,188)        (285,837)          337,432          (1,632,593)

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

Net Loss                                  $  (1,684,188)     $  (337,432)       $  337,432       $  (1,684,188)
                                          =============      ===========        ==========       =============

</TABLE>
(A) For the three months  ended  September  30,  1996.  
(B) For the three months ended June 30, 1996.

<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
             Notes to the Combined Financial Statements (continued)
                                   (Unaudited)

5.   Supplemental Combining Schedules (continued)

                            Statements of Operations
                   For the Six Months Ended September 30, 1996
<TABLE>
<CAPTION>
                                         Boston Financial
                                         Qualified Housing
                                            Tax Credits       Combined         Eliminations
                                           L.P. III (A)     Entities (B)            (A)              Combined

Revenue:
   <S>                                    <C>                 <C>               <C>               <C>         
   Rental                                 $           -       $  885,261        $        -        $    885,261
   Investment                                    65,342            2,020                 -              67,362
   Other                                         99,680           28,259                 -             127,939
                                          -------------       ----------        ----------        ------------
     Total Revenue                              165,022          915,540                 -           1,080,562
                                          -------------       ----------        ----------        ------------

Expenses:
   Asset management fees                        227,722                -                 -             227,722
   General and administrative                   196,315                -                 -             196,315
   Rental operations, exclusive
     of depreciation                                  -          604,495                 -             604,495
   Property management fees                           -           69,021                 -              69,021
   Interest                                       2,000          446,709                 -             448,709
   Depreciation                                       -          250,172                 -             250,172
   Amortization                                  83,602            5,242                 -              88,844
                                          -------------       ----------        ----------        ------------
     Total Expenses                             509,639        1,375,639                 -           1,885,278
                                          -------------       ----------        ----------        ------------

Loss before equity in losses of Local
   Limited Partnerships and
   extraordinary item                          (344,617)        (460,099)                -            (804,716)

Equity in losses of Local Limited
   Partnerships                              (2,403,575)               -           506,010          (1,897,565)

Minority interest in losses of Local
   Limited Partnerships                               -                -             5,684               5,684
                                          -------------       ----------        ----------        ------------

Net loss before extraordinary item           (2,748,192)        (460,099)          511,694          (2,696,597)

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


Net loss                                  $  (2,748,192)      $ (511,694)       $  511,694        $ (2,748,192)
                                          =============       ==========        ==========        ============
</TABLE>

(A) For the six months ended  September  30, 1996.  
(B) For the six months ended June 30, 1996.


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

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

5.   Supplemental Combining Schedules (continued)

                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                            Boston Financial
                                            Qualified Housing
                                               Tax Credits           Combined         Eliminations
                                              L.P. III (A)          Entities (B)           (A)           Combined

<S>                                         <C>                    <C>                <C>               <C>         
Net cash used for operating activities      $      (108,064)       $     (84,716)     $         -       $  (192,780)
                                            ---------------        -------------      -----------       -----------

Cash flows from investing activities:
   Purchases of marketable securities               (49,376)                   -                -           (49,376)
   Proceeds from sales and maturities
     of marketable securities                        39,238                    -                -            39,238
   Cash distributions received from
     Local Limited Partnerships                     319,442                    -                -           319,442
   Additions to fixed assets                              -              (43,748)               -           (43,748)
                                            ---------------        -------------      -----------       -----------
Net cash provided by (used for)
   investing activities                             309,304              (43,748)               -           265,556
                                            ---------------        -------------      -----------       -----------

Cash flows from financing activities:
   Repayment of mortgage notes payable                    -              (87,662)               -           (87,662)
   Repayment of notes receivable, affiliate          17,814                    -                -            17,814
   Advances from (payments to) affiliate            (87,759)              73,943                -           (13,816)
                                            ----------------       -------------      -----------       -----------
Net cash used for financing activities              (69,945)             (13,719)               -           (83,664)
                                            ----------------       --------------     -----------       -----------

Net increase (decrease) in cash and
   cash equivalents                                 131,295             (142,183)               -           (10,888)

Cash and cash equivalents, beginning                 94,632              173,408                -           268,040
                                            ---------------        -------------      -----------       -----------

Cash and cash equivalents, ending           $       225,927        $      31,225      $         -       $   257,152
                                            ===============        =============      ===========       ===========
</TABLE>

(A) For the six months ended  September  30, 1996.  
(B) For the six months ended June 30, 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

Liquidity and Capital Resources

The  Partnership  (including  the Combined  Entities) had a decrease in cash and
cash  equivalents  of $10,888  from  $268,040  at March 31,  1996 to $257,152 at
September  30,  1996.  This  slight  decrease is  attributable  to cash used for
operations and payment of mortgage notes, offset by cash distributions  received
from Local Limited Partnerships.

The Managing  General Partner  initially  designated 3% of the Gross Proceeds to
Reserves.  The Reserves were  established to be used for working  capital of the
Partnership  and  contingencies  related  to  the  ownership  of  Local  Limited
Partnership  interests.  The Managing  General  Partner may increase or decrease
such Reserves from time to time, as it deems appropriate.  During the year ended
March 31, 1993,  the Managing  General  Partner  decided to increase the Reserve
level to  3.75%.  Funds  approximating  $195,000  have been  withdrawn  from the
Reserves  to pay  legal  and  other  costs  related  to the Mod  Rehab  Issue as
previously  discussed.  Additionally,  professional  fees  relating  to  various
property issues totaling approximately  $1,376,000 have been paid from Reserves.
This amount includes  approximately  $1,124,000 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  $1,362,000 (net of paydowns) to purchase
the mortgage of a Local Limited  Partnership.  To date, the Partnership has used
approximately  $648,000 of operating funds to replenish  Reserves.  At September
30,  1996,  approximately  $379,000 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 interests
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,124,000  noted above,  the  Partnership  has also advanced
approximately $553,000 to the Texas Partnerships and $184,000 to two other Local
Limited Partnerships to fund operating deficits.

Since the  Partnership  invests as a limited  partner,  the  Partnership  has no
contractual  duty to  provide  additional  funds to Local  Limited  Partnerships
beyond its specified  investment.  Thus, at September 30, 1996, 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 in the six months ended September 30, 1996.

Results of Operations

For the three and six months ended  September 30, 1996,  Partnership  operations
resulted in a net loss of $1,684,188 and $2,748,192,  respectively,  as compared
to net losses of $1,803,897 and $3,729,178 for the respective 1995 periods.  The
decrease in net loss is primarily attributable to a decrease in equity in losses
and lower general and administrative expenses and rental operations.

The decrease in equity in losses of Local Limited Partnerships is a result of an
increase in  unrecognized  losses  relating to more Local  Limited  Partnerships
which cumulative equity in losses and  distributions  exceeded the Partnership's
total  investments  in these Local Limited  Partnerships  during the  comparable
periods. The Partnership is also in the process of transferring its interests in
six Local Limited Partnerships, resulting in a decrease in equity in losses.


<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


Results of Operations (continued)

The decline in general and  administrative  expenses  and rental  operations  is
primarily  attributable  to the  exclusion  of six  of the  Texas  Partnerships'
operations which were previously combined. Four of these Texas Partnerships were
disposed  of and the  remaining  two are now being  accounted  for on the equity
method  of  accounting.   Please  refer  to  the  section   entitled   "Property
Discussions" for more information.

Property Discussions

Prior to the  transfer  of six of the Texas  Partnerships,  Limited  Partnership
interests had been acquired in sixty-nine Local Limited  Partnerships  which own
and operate rental properties  located 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 rent-up.
Many of the  remaining  sixty-three  Local  Limited  Partnerships  in which  the
Partnership  has  invested  have  stable  operations.   The  majority  of  these
properties are operating satisfactorily.

A few properties are experiencing  operating difficulties and cash flow deficits
due to a variety of reasons. The Local General Partners of those properties have
funded operating  deficits through project expense loans,  subordinated loans or
payments from operating  escrows.  In instances where the Local General Partners
have stopped funding  deficits  because their obligation to do so has 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 in order to improve cash flow.

The Temple-Kyle Limited  Partnership located in Temple,  Texas, after defaulting
on its mortgage entered into a Plan of  Reorganization.  The plan called for the
Partnership to purchase the mortgage from the current lender plus a non-recourse
note which was paid in full as of March 1996. Affiliates of the Managing General
Partner  replaced  the  Local  General  Partner  and the  management  agent.  An
affiliate of the Managing General Partner is currently  working to refinance the
property,  subject to approval by the local housing authority. Two local lenders
have expressed a possible interest in providing financing for Temple-Kyle.

As previously  reported,  the Managing  General Partner has transferred or is in
the process of transferring  all of the assets of six of the Texas  Partnerships
subject to their liabilities to unaffiliated entities. Crown Point, Godley Arms,
Glenbrook Apartments and Quail Runs' transfers were effective February 21, 1996,
February  21,  1996,  June 7,  1996,  and July 3,  1996.  Two of the  properties
(Sherwood  Arms and Lone Oak  Apartments)  are being  transferred  to new owners
effective after September 30, 1996.

The Managing  General  Partner of the  Partnership  has executed an agreement to
sell the general partner  interests in the seven  remaining  Texas  Partnerships
(Crestwood Place, Eagle Nest Apartments, Hallet-West Apartments, One Main Place,
Pilot Point Apartments,  Shady Shores Apartments and Willowick Apartments) to an
unaffiliated buyer. These properties will be restructured into a new partnership
in which the Partnership  will retain a limited partner interest for a period of
time expected to be at least twelve months.  During this period,  investors will
continue to receive tax credits from these properties.  For tax purposes,  these
events will result in both Section 1231 Gain and  Cancellation  of  Indebtedness
income.  In addition,  the transfer of ownership will result in a nominal amount
of recapture of tax credits, because the Texas Partnerships represent only 2% of
the Partnership's tax credits.



<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
       
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Property Discussions (continued)

It was  previously  reported  that  Harbour View  Associates,  located in Staten
Island,  New York, had defaulted on its HUD-insured loan and the lender assigned
the loan to HUD.  HUD has a program to sell all  performing  and  non-performing
mortgages  in  a  public  auctions  that  are  scheduled  to  take  place  on  a
region-to-region basis over the next few years. The property has received notice
from HUD that the mortgage will be included in the upcoming auction that will be
held in December,  1996. If the mortgage is sold to a new lender, the property's
continued feasibility will depend on the ability of the Local General Partner or
the  Partnership or their  respective  affiliates to purchase the mortgage or to
negotiate a satisfactory arrangement with the buyer.

As  previously  reported,  Regency  Square and Rolling  Hills,  both  located in
Dayton,  Ohio, have experienced low occupancy levels and rental rates due to the
deterioration  of the local  economy  and the  neighborhoods  in which  they are
located. The local general partner and Managing General Partner were involved in
prolonged workout  negotiations with HUD, but ultimately the mortgages for these
properties  were  sold  to a bank  in a  non-performing  mortgage  auction.  The
Partnership made an unsuccessful  auction bid to purchase these  mortgages.  The
Partnership and local general partner are negotiating with the new notes holder.
Should these efforts prove  unsatisfactory,  it is unlikely that the Partnership
will be able to retain its interests in both properties in the long-term.
Such losses would result in recapture of tax credits for the investors.

Breckenridge  Creste,  located in Duluth,  GA, has been  experiencing  financial
difficulties,  as a result of  increased  vacancies,  a weak  rental  market and
deferred  maintenance.  In August 1996,  an  affiliate  of the Managing  General
Partner assumed  property  management  responsibilities  of the property and was
admitted as a General  Partner.  Efforts  are now  underway to develop a plan to
stabilize property operations.

Shoreline and  Waterfront,  Buffalo,  New York  properties  which share a common
Local General Partner have been experiencing  occupancy problems due to the soft
rental  market,  deferred  maintenance  and security  issues.  The Local General
Partner is increasing  marketing efforts to stabilize  occupancy and improve the
overall physical  conditions at the properties.  However, it is likely that such
an effort will require a significant  influx of  additional  capital in order to
address these problems. This may include advances from Partnership Reserves. The
Managing General Partner, together with the Local General Partner, are currently
devising a strategy to stabilize  operations of both of these  properties.  Both
properties currently carry cash flow mortgages from the State of New York.



<PAGE>



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

                             (A Limited Partnership)


PART II       OTHER INFORMATION

Items 1-5     Not applicable

Item 6        Exhibits and reports on Form 8-K

                (a)Exhibits - None

                (b)Reports  on Form 8-K - No  reports  on Form  8-K  were  filed
                   during the quarter ended September 30, 1996.


<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 13, 1996                 BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                               CREDITS L.P. III

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




                                            /s/Georgia Murray
                                               Georgia Murray
                                               A Managing Director, Treasurer
                                                  and Chief Financial Officer



<PAGE>