November 9, 1998




Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312

Re:     Boston Financial Qualified Housing Tax Credits L.P.  III
        Report on Form 10-Q for Quarter Ended September 30, 1998
        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/Stephen Guilmette
    
Stephen Guilmette
Assistant Controller





QH3-Q2.DOC



<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

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

For the quarterly period ended             September 30, 1998
                                       ----------------------------------

                                       OR

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


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

Commission file number           01-18462
                           -------------------
                                                 
        Boston Financial Qualified Housing Tax Credits L.P.III             
       --------------------------------------------------------
        (Exact name of registrant as specified in its charter)


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


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


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


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


<PAGE>


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

                                TABLE OF CONTENTS



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

Item 1.  Combined Financial Statements

         Combined Balance Sheets - September 30, 1998 (Unaudited)
           and March 31, 1998                                              1

         Combined Statements of Operations (Unaudited) - For 
           the Three and Six Months Ended September 30, 1998 and 1997      2

         Combined Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Six Months Ended September 30, 1998       3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Six Months Ended September 30, 1998 and 1997                    4

         Notes to the Combined Financial Statements (Unaudited)            5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                             11

PART II - OTHER INFORMATION

Items 1-6                                                                  14

SIGNATURE                                                                  15



<PAGE>


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

                                                          
           COMBINED BALANCE SHEETS - September 30, 1998 and March 31, 1998

<TABLE>
<CAPTION>

                                                                                September 30,        March 31,
                                                                                    1998             1998
                                                                                  (Unaudited)
Assets

<S>                                                                             <C>              <C>          
Cash and cash equivalents                                                       $     600,128    $     311,867
Marketable securities, at fair value                                                  201,476          275,387
Investments in Local Limited Partnerships, net
   of reserve for valuation of $1,635,000 (Note 1)                                 17,322,203       19,319,502
Accounts receivable, net of allowance for bad debt of
   $37,445 and $77,010, respectively                                                   85,607           90,467
Interest receivable                                                                    13,160           13,298
Prepaid expenses                                                                       25,721           25,247
Tenant security deposits                                                               78,096           68,292
Replacement reserves                                                                  218,136          194,671
Rental property at cost, net of accumulated
   depreciation and reserve for valuation                                          15,214,113       16,267,802
Deferred acquisition fees escrow                                                      225,000          225,000
Deferred expenses, net of $117,646 and $104,540
   of accumulated amortization, respectively                                          196,021          209,127
Other assets                                                                          150,490          131,127
                                                                                -------------    -------------
   Total Assets                                                                 $  34,330,151    $  37,131,787
                                                                                =============    =============

Liabilities and Partners' Equity

Accounts payable to affiliates                                                  $   1,775,497    $   1,702,519
Accounts payable and accrued expenses                                                 472,926          484,817
Interest payable                                                                      317,558          312,091
Note payable, affiliate                                                               514,968          514,968
Security deposits payable                                                              77,379           70,630
Due to affiliate                                                                      323,046          323,046
Deferred acquisition fees payable                                                     225,000          225,000
General partner advances                                                              200,000          200,000
Mortgage notes payable                                                              7,453,114        8,641,832
                                                                                -------------    -------------
   Total Liabilities                                                               11,359,488       12,474,903
                                                                                -------------    -------------

Minority interest in Local Limited Partnerships                                       909,862          907,515
                                                                                -------------    -------------

General, Initial and Investor Limited Partners' Equity                             22,059,124       23,748,605
Net unrealized gains on marketable securities                                           1,677              764
                                                                                -------------    -------------
   Total Partners' Equity                                                          22,060,801       23,749,369
                                                                                -------------    -------------
   Total Liabilities and Partners' Equity                                       $  34,330,151    $  37,131,787
                                                                                =============    =============


The accompanying notes are an integral part of these combined financial statements.
</TABLE>


<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, 1998 and 1997

<TABLE>
<CAPTION>

                                                        Three Months Ended                  Six Months Ended
                                                  September 30,     September 30,     September 30,    September 30,
                                                      1998              1997              1998             1997
                                                 --------------   ---------------   --------------     ------------

Revenue:
<S>                                               <C>              <C>               <C>               <C>         
   Rental                                         $    620,267     $     642,717     $  1,200,173      $  1,249,763
   Investment                                            9,280            11,546           17,886            21,275
   Other                                                35,747            40,909           81,263           159,374
                                                  ------------     -------------     ------------      ------------
     Total Revenue                                     665,294           695,172        1,299,322         1,430,412
                                                  ------------     -------------     ------------      ------------

Expenses:
   Asset management fees, related party                 95,938           109,095          191,876           218,190
   General and administrative (includes
     reimbursements to affiliates of $65,076
     and $98,159 in 1998 and 1997, respectively)        83,940           118,805          197,012           241,634
   Bad debt                                            123,785            52,331           96,904            64,167
   Rental operations, exclusive of depreciation        352,194           394,505          697,349           854,409
   Property management fees, related party              29,339            45,965           79,493            88,190
   Interest                                            204,152           216,925          394,574           464,701
   Depreciation                                        155,339           203,985          321,531           395,097
Amortization                                            44,257            46,299           88,560            92,597
                                                  ------------     -------------     ------------      ------------
Total Expenses                                       1,088,944         1,187,910        2,067,299         2,418,985
                                                  ------------     -------------     ------------      ------------

Loss before equity in losses of Local Limited  
   Partnerships,  minority interest, loss on 
   liquidation of interests in Local Limited 
   Partnerships and extraordinary item                (423,650)         (492,738)        (767,977)         (988,573)

Equity in losses of Local Limited Partnerships
   (Note 1)                                           (711,318)         (540,762)      (1,559,340)       (1,291,958)

Minority interest in losses of
   Local Limited Partnerships                           (4,469)            7,967           (2,347)           10,851
Loss on liquidation of interests in Local Limited
   Partnerships (Note 3)                                (4,835)           (5,416)          (4,835)           (5,416)
                                                  ------------     -------------     ------------      ------------

Net Loss before extraordinary items                 (1,144,272)       (1,030,949)      (2,334,499)       (2,275,096)

Extraordinary gain on cancellation of
   indebtedness (Note 3)                               645,018            78,166          645,018            78,166
                                                  ------------     -------------     ------------      ------------

Net Loss                                          $   (499,254)    $    (952,783)    $ (1,689,481)     $ (2,196,930)
                                                  ============     =============     ============      ============

Net Loss allocated:
   To General Partners                            $     (4,993)    $      (9,528)    $    (16,895)     $    (21,969)
   To Limited Partners                                (494,261)         (943,255)      (1,672,586)       (2,174,961)
                                                  ------------     -------------     ------------      ------------
                                                  $   (499,254)    $    (952,783)    $ (1,689,481)     $ (2,196,930)
                                                  ============     =============     ============      ============
Net Loss before extraordinary item per
   Limited Partnership Unit (100,000 Units)       $     (11.33)    $      (10.20)    $     (23.11)     $     (22.52)
                                                  ============     =============     ============      ============
Extraordinary item per Limited Partnership
   Unit (100,000 Units)                           $       6.39     $        0.77     $       6.39      $       0.77
                                                  ============     =============     ============      ============
Net Loss per Limited Partnership Unit
   (100,00 Units)                                 $      (4.94)    $       (9.43)    $     (16.72)     $     (21.75)
                                                  ============     =============     ============      ============
   

The accompanying notes are an integral part of these combined financial statements.
</TABLE>

<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, 1998


<TABLE>
<CAPTION>

                                                        Initial        Investor          Net
                                        General         Limited         Limited      Unrealized
                                       Partners        Partners        Partners        Gains           Total

<S>                                   <C>              <C>            <C>             <C>          <C>          
Balance at March 31, 1998             $  (638,359)     $  5,000       $ 24,381,964    $      764   $  23,749,369
                                      -----------      --------       ------------    ----------   -------------

Comprehensive Loss:
   Net Loss                               (16,895)            -         (1,672,586)            -      (1,689,481)
   Change in net unrealized
   gains on marketable securities
   available for sale                           -             -                  -           913             913
                                      -----------       -------       ------------    ----------   -------------
Comprehensive Loss                        (16,895)            -         (1,672,586)          913      (1,688,568)
                                      -----------       -------       ------------    ----------   -------------

Balance at
   September 30, 1998                 $  (655,254)     $  5,000       $ 22,709,378    $    1,677   $  22,060,801
                                      ===========      ========       ============    ==========   =============

The accompanying notes are an integral part of these combined financial statements.
</TABLE>


<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, 1998 and 1997


<TABLE>
<CAPTION>

                                                                                  1998                1997
                                                                             ---------------     -------------

<S>                                                                          <C>                 <C>           
Net cash used for operating activities                                       $    (106,273)      $    (129,377)
                                                                             -------------       -------------

Cash flows from investing activities:
    Advances to affiliates                                                         (17,986)            (52,009)
    Purchases of marketable securities                                            (148,718)           (273,744)
    Proceeds from sales and maturities of
      marketable securities                                                        223,718             204,811
    Cash distributions received from Local
      Limited Partnerships                                                         380,746             270,375
    Deposits to replacement reserves                                               (23,884)            (10,046)
    Additions to rental property                                                   (49,463)            (72,981)
                                                                             -------------       -------------
Net cash provided by investing activities                                          364,413              66,406
                                                                             -------------       -------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                            (38,029)            (61,707)
    Advances from affiliate                                                         68,150             119,885
                                                                             -------------       -------------
Net cash provided by financing activities                                           30,121              58,178
                                                                             -------------       -------------

Net increase (decrease) in cash and cash equivalents                               288,261              (4,793)

Cash and cash equivalents, beginning                                               311,867             379,614
                                                                             -------------       -------------

Cash and cash equivalents, ending                                            $     600,128       $     374,821
                                                                             =============       =============

Supplemental Disclosure:
     Cash paid for interest                                                  $     376,784       $     489,090
                                                                             =============       =============

The accompanying notes are an integral part of these combined financial statements.
</TABLE>

<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, 1998. 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.

The Managing  General Partner has elected to report results of the Local Limited
Partnerships  on a 90 day lag  basis,  because  the Local  Limited  Partnerships
report  their  results on a calendar  year  basis.  Accordingly,  the  financial
information  of  the  Local  Limited   Partnerships  that  is  included  in  the
accompanying  financial  statements  is as of June 30,  1998 and  1997.  Certain
reclassifications have been made to prior period financial statements to conform
to current period classifications.

1.   Investments in Local Limited Partnerships

The  Partnership  uses the equity  method to  account  for its  limited  partner
interests in  fifty-five  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  acquired a 99% interest in the
profits, losses, tax credits and cash flows from operations of each of the Local
Limited  Partnerships,  except for Granite,  Colony Apartments and Harbour View,
where the Partnership's ownership interest is 97%, 49% and 48.96%, respectively.
Upon  dissolution,  proceeds will be  distributed  according to each  respective
partnership agreement.

The  following is a summary of  Investments  in Local  Limited  Partnerships  at
September 30, 1998, 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                           $  59,851,809

Cumulative equity in losses of Local Limited Partnerships (net of
   cumulative unrecognized losses of $27,836,395)                                                (42,398,677)

Cumulative cash distributions received from Local Limited Partnerships                            (2,637,457)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       14,815,675

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   5,398,026

   Accumulated amortization of acquisition fees and expenses                                      (1,256,498)
                                                                                               -------------

Investments in Local Limited Partnerships                                                         18,957,203

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------
                                                                                               $  17,322,203
                                                                                               -------------
</TABLE>

<PAGE>

          BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
             NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


1.   Investments in Local Limited Partnerships (continued)

The  Partnership's  share of the net losses of the Local  Limited  Partnerships,
excluding the Combined Entities,  for the six months ended September 30, 1998 is
$3,473,038. For the six months ended September 30, 1998, the Partnership has not
recognized  $1,917,235  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.   Effect of Recently Issued Accounting Standard

In June,  1997, the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards No. 130, "Reporting  Comprehensive  Income." The
Statement,  which is effective  for fiscal years  beginning  after  December 15,
1997,  requires  that the  Partnership  display  an  amount  representing  total
comprehensive income for the period in its financial statements. The Partnership
adopted the new standard effective April 1, 1998.

3.   Liquidation of Interests in Local Limited Partnerships

As previously  reported,  the Managing  General  Partner  transferred all of the
assets of twelve of the Texas  Partnerships,  subject to their  liabilities,  to
unaffiliated entities. Crown Point, Godley Arms, Glenbrook Apartments, Quail Run
Apartments,  Sherwood Arms Housing, Lone Oak Apartments, Hallet West Apartments,
Lakeway Colony, Crestwood Place, Eagle Nest Apartments, One Main Place and Pilot
Point  Apartments  were  transferred  prior to March 31, 1998. For tax purposes,
these events resulted in both Section 1231 gain and cancellation of indebtedness
income. In addition,  the transfer of ownership  resulted in a nominal amount of
recapture of tax credits because the Texas Partnerships represent only 2% of the
Partnership's tax credits.

For financial  reporting  purposes,  loss on  liquidation  of interests in Local
Limited  Partnerships  of  $4,835  and  extraordinary  gain on  cancellation  of
indebtedness  of $645,018 were recognized in the period ended September 30, 1998
as a result of the transfer of the thirteenth Texas Partnership, Willowick.




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

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

4.   Supplemental Combining Schedules
<TABLE>
<CAPTION>

                                 Balance Sheets

                                            Boston Financial
                                             Qualified Housing      Combined
                                                 Tax Credits        Entities                          Combined
                                                L.P. III (A)           (B)        Eliminations           (A)
Assets
<S>                                            <C>              <C>               <C>              <C>          
Cash and cash equivalents                      $     505,207    $      94,921     $           -    $     600,128
Marketable securities, at fair value                 201,476                -                 -          201,476
Investments in Local Limited
   Partnerships, net                              21,780,791                -        (4,458,588)      17,322,203
Accounts receivable, net                             658,866           85,607          (658,866)          85,607
Interest receivable                                   13,160                -                 -           13,160
Notes receivable                                   1,394,916                -        (1,394,916)               -
Prepaid expenses                                       4,480           21,241                 -           25,721
Tenant security deposits                                   -           78,096                 -           78,096
Replacement reserves                                       -          218,136                 -          218,136
Rental property at cost, net of
   accumulated depreciation                                -       14,416,969           797,144       15,214,113
Deferred acquisition fees escrow                     225,000                -                 -          225,000
Deferred expenses, net                                     -          196,021                 -          196,021
Other assets                                               -          150,490                 -          150,490
                                               -------------    -------------     -------------    -------------
     Total Assets                              $  24,783,896    $  15,261,481     $  (5,715,226)   $  34,330,151
                                               =============    =============     =============    =============

Liabilities and Partners' Equity
Accounts payable to affiliates                 $   1,767,740    $     666,623     $    (658,866)   $   1,775,497
Accounts payable and accrued
   expenses                                          215,387          257,539                 -          472,926
Interest payable                                           -          317,558                 -          317,558
Note payable, affiliate                              514,968                -                 -          514,968
Security deposits payable                                  -           77,379                 -           77,379
Due to affiliate                                           -          323,046                 -          323,046
Deferred acquisition fees payable                    225,000                -                 -          225,000
General partner advances                                   -          200,000                 -          200,000
Mortgage notes payable                                     -        8,848,030        (1,394,916)       7,453,114
                                               -------------    -------------     -------------    -------------
     Total Liabilities                             2,723,095       10,690,175        (2,053,782)      11,359,488
                                               -------------    -------------     -------------    -------------

Minority interest in Local
   Limited Partnerships                                    -                -           909,862          909,862
                                               -------------    -------------     -------------    -------------

General, Initial and Investor Limited
   Partners' Equity                               22,059,124        4,571,306        (4,571,306)      22,059,124
Net unrealized gains on marketable
   securities                                          1,677                -                 -            1,677
                                               -------------    -------------     -------------    -------------
     Total Partners' Equity                       22,060,801        4,571,306        (4,571,306)      22,060,801
                                               -------------    --------------    -------------    -------------
     Total Liabilities and
       Partners' Equity                        $  24,783,896    $  15,261,481     $  (5,715,226)   $  34,330,151
                                               =============    =============     =============    =============
</TABLE>

(A) As of September 30, 1998.  
(B) As of June 30, 1998.


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

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

4.   Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>

                                                   Statements of Operations
                                        For the Three Months Ended September 30, 1998


                                               Boston Financial
                                              Qualified Housing     Combined
                                                 Tax Credits        Entities                          Combined
                                                L.P. III (A)           (B)         Eliminations          (A)
Revenue:
<S>                                             <C>             <C>               <C>              <C>          
   Rental                                       $          -    $     620,267     $           -    $     620,267
   Investment                                          8,586              694                 -            9,280
   Other                                              23,659           12,088                 -           35,747
                                                ------------    -------------     -------------    -------------
     Total Revenue                                    32,245          633,049                 -          665,294
                                                ------------    --------------    -------------    -------------

Expenses:
   Asset management fees, related party               95,938                -                 -           95,938
   General and administrative                         83,940                -                 -           83,940
   Bad debt                                          123,785                -                 -          123,785
   Rental operations, exclusive of depreciation            -          352,194                 -          352,194
   Property management fee, related party                  -           29,339                 -           29,339
   Interest                                            2,000          202,152                 -          204,152
   Depreciation                                            -          155,339                 -          155,339
   Amortization                                       37,704            6,553                 -           44,257
                                                ------------    -------------     -------------    -------------
     Total Expenses                                  343,367          745,577                 -        1,088,944
                                                ------------    -------------     -------------    -------------

Loss before equity in losses of Local Limited  
   Partnerships,  minority interest, loss on 
   liquidation of interest in Local Limited 
   Partnership and extraordinary item               (311,122)        (112,528)                -         (423,650)

Equity in losses of Local Limited
   Partnerships                                     (183,297)               -          (528,021)        (711,318)

Minority interest in losses of
   Local Limited Partnerships                              -                -            (4,469)          (4,469)

Loss on liquidation of interest in Local
   Limited Partnership                                (4,835)               -                 -           (4,835)
                                                ------------    -------------     -------------    -------------

Net loss before extraordinary item                  (499,254)        (112,528)         (532,490)      (1,144,272)

Extraordinary gain on cancellation of
   indebtedness                                            -          645,018                 -          645,018
                                                ------------    -------------     -------------    -------------

Net Income (Loss)                               $   (499,254)   $     532,490     $    (532,490)   $    (499,254)
                                                ============    =============     =============    =============
</TABLE>

(A) For the three months ended September 30, 1998.  
(B) For the three months ended June 30, 1998.
                 
<PAGE>
            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

5.   Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>

                                                   Statements of Operations
                                         For the Six Months Ended September 30, 1998


                                               Boston Financial
                                              Qualified Housing     Combined
                                                 Tax Credits        Entities                          Combined
                                                L.P. III(A)            (B)         Eliminations          (A)
Revenue:
<S>                                             <C>             <C>               <C>              <C>         
   Rental                                       $         -     $   1,200,173     $           -    $  1,200,173
   Investment                                         15,467            2,419                 -          17,886
   Other                                              53,045           50,587           (22,369)         81,263
                                                ------------    -------------     -------------    ------------
     Total Revenue                                    68,512        1,253,179           (22,369)      1,299,322
                                                ------------    --------------    -------------    ------------

Expenses:
   Asset management fees, related party              191,876                -                 -         191,876
   General and administrative                        197,012                -                 -         197,012
   Bad debt                                           96,904                -                 -          96,904
   Rental operations, exclusive of depreciation            -          697,349                 -         697,349
   Property management fee, related party                  -           79,493                 -          79,493
   Interest                                            3,500          413,443           (22,369)        394,574
   Depreciation                                            -          321,531                 -         321,531
   Amortization                                       75,454           13,106                 -          88,560
                                                ------------    -------------     -------------    ------------
     Total Expenses                                  564,746        1,524,922           (22,369)      2,067,299
                                                ------------    --------------    -------------    ------------

Loss before equity in losses of Local Limited  
   Partnerships, minority interest, loss on   
   liquidation of interest in Local Limited   
   Partnership and extraordinary item               (496,234)       (271,743)         -                (767,977)

Equity in losses of Local Limited
   Partnerships                                   (1,188,412)               -          (370,928)     (1,559,340)

Minority interest in losses of
   Local Limited Partnerships                              -                -            (2,347)         (2,347)

Loss on liquidation of interest in Local
   Limited Partnership                                (4,835)               -                 -          (4,835)
                                                ------------    -------------     -------------    ------------

Net loss before extraordinary item                (1,689,481)        (271,743)         (373,275)     (2,334,499)
Extraordinary gain on cancellation of
   indebtedness                                            -          645,018                 -         645,018
                                                ------------    -------------     -------------    ------------

Net Income (Loss)                               $ (1,689,481)   $     373,275     $    (373,275)   $ (1,689,481)
                                                ============    =============     =============    ============
</TABLE>

(A) For the six months ended September 30, 1998.  
(B) For the six months ended June 30, 1998.


<PAGE>

            BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
             NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

4.   Supplemental Combining Schedules (continued)

<TABLE>
<CAPTION>

                            Statements of Cash Flows

                                              Boston Financial
                                             Qualified Housing      Combined
                                                 Tax Credits        Entities                          Combined
                                                L.P. III (A)           (B)        Eliminations            (A)
Net cash provided by (used for)
<S>                                            <C>              <C>               <C>              <C>           
   operating activities                        $    (156,457)   $       50,184    $           -    $    (106,273)
                                               -------------    --------------    -------------    -------------

Cash flows from investing activities:
   Advances to affiliates                            (17,986)                -                -          (17,986)
   Repayment of notes receivable, affiliate           11,335                 -          (11,335)               -
   Purchases of marketable securities               (148,718)                -                -         (148,718)
   Proceeds from sales and maturities
     of marketable securities                        223,718                 -                -          223,718
   Cash distributions received from
     Local Limited Partnerships                      380,746                 -                -          380,746
   Deposits to replacement reserves                        -           (23,884)               -          (23,884)
   Additions to rental property                            -           (49,463)               -          (49,463)
                                               -------------    --------------    -------------    -------------
Net cash provided by (used for)
   investing activities                              449,095           (73,347)         (11,335)         364,413
                                               -------------    --------------    -------------    -------------

Cash flows from financing activities:
   Repayment of mortgage notes
      payable                                              -           (49,364)          11,335          (38,029)
   Advances from affiliate                                 -            68,150                -           68,150
                                               -------------    --------------    -------------    -------------
Net cash provided by
   financing activities                                    -            18,786           11,335           30,121
                                               -------------    --------------    -------------    -------------

Net increase (decrease) in cash
   and cash equivalents                              292,638            (4,377)               -          288,261

Cash and cash equivalents,
   beginning                                         212,569            99,298                -          311,867
                                               -------------    --------------    -------------    -------------

Cash and cash equivalents,
   ending                                      $     505,207    $       94,921    $           -    $     600,128
                                               =============    ==============    =============    =============

</TABLE>

(A) For the six months ended September 30, 1998.  
(B) For the six months ended June 30, 1998.





<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

At September 30, 1998, the  Partnership,  including the Combined  Entities,  had
cash and cash equivalents of $600,128 as compared to $311,867 at March 31, 1998.
The increase is primarily attributable to cash distributions received from Local
Limited  Partnerships  and  proceeds  from sales and  maturities  of  marketable
securities.  The  increase  is  partially  offset by cash  used for  operations,
purchases of marketable  securities,  additions to rental property and repayment
of mortgage notes payable.

The  Managing  General  Partner  initially  designated  3% of Gross  Proceeds as
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
September 30, 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. Additionally,  professional fees relating
to various property issues totaling approximately $1,694,000 have been paid from
Reserves.   This  amount  includes   approximately   $1,311,000  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 $1,126,000 (net
of paydowns) to purchase the mortgage of a Local Limited  Partnership.  To date,
the  Partnership  has  used  approximately  $1,592,000  of  operating  funds  to
replenish Reserves. At September 30, 1998,  approximately $660,000 of cash, cash
equivalents and marketable securities has 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 $1,311,000  noted above,  the  Partnership  has also advanced
approximately $622,000 to the Texas Partnerships and $695,000 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, 1998, the  Partnership
had no contractual or other  obligation to any Local Limited  Partnership  which
had not been paid or provided for.

Cash Distributions

No cash distributions were made during the six months ended September 30, 1998.

Results of Operations

For the six months ended September 30, 1998,  Partnership operations resulted in
a net loss of $1,689,481  as compared to a net loss of  $2,196,930  for the same
period in 1997. The decrease in net loss is primarily attributable to a decrease
in property  operating  expenses,  net of a decrease in rental and other revenue
due to the  transfer of seven of the  Combined  Entities.  These  decreases  are
partially   offset  by  a  increase  in  equity  in  losses  of  Local   Limited
Partnership's  due to increases  in property  operating  expenses.  In addition,
extraordinary gain on cancellation of indebtedness increased due to the transfer
of Willowick in the quarter ended September 30, 1998.

<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.

Many of the  remaining  fifty-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.

Boulevard  Commons  IIA,  located in Chicago,  Illinois,  has been  experiencing
operating deficits.  Expenses have been increasing due to increasing maintenance
and  capital  needs,  security  issues and high  turnover at the  property.  The
Managing   General  Partner  is  working  with  the  Local  General  Partner  to
restructure the current debt.  Negotiations between the Managing General Partner
and Local General Partner are ongoing.  The Managing  General Partner is closely
monitoring this property.

Columbia  Townhouses,   located  in  Burlington,  Iowa,  has  been  experiencing
operating deficits.  As of September 30, 1998, occupancy was 57%. Recently,  the
Local General Partner approached the lender about the possibility of refinancing
the mortgage. In addition,  the Local General Partner,  Managing General Partner
and Management Agent are working together to review the marketing,  security and
long-term  strategy for this property.  The Managing  General Partner is closely
monitoring this property.

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  mortgage  was sold at auction to an  unaffiliated
institutional  buyer.  The Managing  General  Partner and Local General  Partner
continue  to  participate  in  workout  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 and  Partnership  affiliates to negotiate a
satisfactory  workout agreement with the new lender. The Partnership's  carrying
value of this investment for financial reporting purposes is zero. Occupancy for
this property as of June 30, 1998 was 98%.

A  refinancing  application  was  submitted  for Kyle Hotel,  located in Temple,
Texas,  in December 1997. The potential  lender needs to approve  several issues
before  the  application  will be  approved.  The  Managing  General  Partner is
monitoring the progress.

Pleasant  Plaza,  located in Malden,  Massachusetts,  as well as South  Holyoke,
located in Holyoke,  Massachusetts,  receive a subsidy  under the State  Housing
Assistance  Rental Program  (SHARP),  which is an important part of their annual
income. As originally conceived, the SHARP subsidy was scheduled to decline over
time to match  increases  in net  operating  income.  However,  increases in net
operating income failed to keep pace with the decline in the SHARP subsidy. Many
of the SHARP properties  (including Pleasant Plaza and South Holyoke) structured
workouts that  included  additional  subsidies in the form of Operating  Deficit
Loans (ODL's).  Effective  October 1, 1997, the  Massachusetts  Housing  Finance
Agency  (MHFA),  which  provided the SHARP  subsidies,  withdrew  funding of the
Operating  Deficit Loans.  Properties  unable to make full debt service payments
were declared in default by MHFA. The Managing General Partner joined a group of
SHARP property  owners called the Responsible  SHARP Owners,  Inc. (RSO) and is
negotiating with MHFA and the Local General Partners of Pleasant Plaza and South
Holyoke to find a solution to the problems  that will result from the  withdrawn
subsidies.

<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)

Given  existing  operating  deficits and the  dependence  on these  subsidies by
Pleasant Plaza and South Holyoke House,  it is likely that both  properties will
default on their mortgage obligations in the near future. On September 16, 1998,
the Partnership joined with the RSO and about 20 other SHARP property owners and
filed suit  against the MHFA (Mass.  Sup.  Court Civil Action  #98-4720).  Among
other  things,   the  suit  seeks  to  enforce  the  MHFA's  previous  financial
commitments  to the SHARP  properties.  The  lawsuit is complex and in its early
stages,  so no predications can be made at this time as to the ultimate outcome.
In the meantime, the Managing General Partner intends to continue to participate
in the RSO's efforts to negotiate a resolution of this matter with MHFA.

In addition,  the Local General  Partner for Pleasant  Plaza is in  negotiations
with the MHFA to fund debt service  deficits  that had been covered by the SHARP
mortgage  subsidies  and  avoid a default  on its  mortgage.  The Local  General
Partner plans to cover the SHARP subsidy gap by increasing  rents and containing
costs.  In the meantime,  the Local General Partner has negotiated a 1998 budget
with the MHFA.  However,  further  negotiations to resolve these issues with the
MHFA are expected in the near future. As previously reported,  the Local General
Partner sought bankruptcy  protection.  His reorganization  plan was approved in
September 1997. The plan will not materially  affect property  operations or the
Local General Partner's interest in the Local Limited Partnership.

Waterfront and Shoreline,  both located in Buffalo,  New York,  continue to have
operating deficits as a result of a soft rental market, deferred maintenance and
security issues. As previously reported,  the Managing General Partner and Local
General Partner have successfully negotiated a Drug Elimination Grant (NOFA) for
Shoreline.  Waterfront  was turned down for the NOFA grant.  However,  they will
reapply next year. The Shoreline  grant should be funded during 1998 and will be
used to support drug prevention,  educational programs and increased security on
the property.  For both  Waterfront  and  Shoreline,  the  Management  Agent has
applied for  consideration for a Project  Improvement  Program (PIP) and applied
for a Safe Neighborhood Grant. At this point,  deficits continue to be funded by
the  Management  Agent.  As noted  previously,  the viability of the  properties
depends upon  funding  deficits  until  receipt of the grants.  Both  properties
currently  carry cash flow mortgages with New York State.  The Managing  General
Partner is working closely with the Local General Partner to develop a plan that
will address these concerns.

Willow Lake,  located in Kansas, is experiencing  operating  difficulties due to
soft rental market  conditions.  As previously  reported,  the Managing  General
Partner negotiated a six year extension to the original workout  agreement.  The
six year  extension  will expire on May 31,  2001.  In  addition,  the  Managing
General Partner is working with the Local General Partner to negotiate permanent
debt service relief, increase rents and monitor property expenses.

As  previously  reported,  negotiations  between the Managing  General  Partner,
Lender and  prospective  buyer for the remaining Texas  Partnership,  Willowick,
have been  successful,  and a transfer  was  effective  August 4, 1998.  For tax
purposes,  this event will result in both Section 1231 gain and  cancellation of
indebtedness  income.  In addition,  the transfer of ownership will result in an
estimated tax credit recapture of $2.44 per unit for 1998.

Impact of Year 2000

The Managing  General  Partner has assessed the  Partnership's  exposure to date
sensitive  computer  software  programs that may not be operative  subsequent to
1999 and has  executed a requisite  course of action to minimize  Year 2000 risk
and ensure that neither  significant  costs nor  disruption  of normal  business
operations are encountered.  However,  due to the inherent  uncertainty that all
systems of outside vendors or other  companies on which the  Partnership  and/or
Local Limited  Partnerships  rely will be  compliant,  the  Partnership  remains
susceptible to consequences of the Year 2000 issue.

<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, 1998.


<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 9, 1998               BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                      CREDITS L.P. III

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




                                      /s/Randolph G. Hawthorne
                                      Randolph G. Hawthorne
                                      Managing Director, Vice President and
                                      Chief Operating Officer



<PAGE>