August 13, 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 June 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/Dianne Groark           
Dianne Groark
Assistant Controller

 



<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                 June 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
                               ----------------      -----------------------
                   
For Quarter Ended    June 30, 1998      Commission file number       01-18462   
                     -------------                                  -----------
               
             Boston Financial Qualified Housing Tax Credits L.P. III 
           ----------------------------------------------------------
            (Exact name of registrant as specified in its charter)


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


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


Registrant's telephone number, including area code        (617) 439-3911       
                                                          ---------------
        
Indicate by check mark whether the registrant (1) has filed all reports  
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the  preceding 12 months (or for such shorter  period that the  
registrant was required to file such reports), and (2) has been subject to such 
filing  requirements  for the past 90 days.
                                                     Yes X No .


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

                                      TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION                                          Page No.

Item 1.  Combined Financial Statements

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

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

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

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

PART II - OTHER INFORMATION

Items 1-6                                                                    13

SIGNATURE  14

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

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

<TABLE>
<CAPTION>

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

<S>                                                                             <C>              <C>          
Cash and cash equivalents                                                       $     489,655    $     311,867
Marketable securities, at fair value                                                  225,512          275,387
 
Investments in Local Limited Partnerships, net
   of reserve for valuation of $1,635,000 (Note 1)                                 18,985,202       20,136,185
 
Accounts receivable, net of allowance for bad debt of
   $50,129 and $77,010, respectively                                                   99,930           90,467
Interest receivable                                                                     6,903           13,298
Prepaid expenses                                                                       14,769           25,247
Tenant security deposits                                                               79,562           68,292
Replacement reserves                                                                  209,490          194,671
 
Rental property at cost, net of accumulated
   depreciation                                                                    15,330,305       15,451,119
Deferred acquisition fees escrow                                                      225,000          225,000
Deferred expenses, net of $110,913 and $104,360              
   of accumulated amortization, respectively                                          202,574          209,127
Other assets                                                                          144,360          131,127
 
Total Assets                                                                    $  36,013,262    $  37,131,787
 

Liabilities and Partners' Equity

Accounts payable to affiliates                                                  $   1,687,773    $   1,702,519
Accounts payable and accrued expenses                                                 574,606          484,817
Interest payable                                                                      329,824          312,091
Note payable - affiliate                                                              514,968          514,968
Security deposits payable                                                              78,762           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                                                              8,614,713        8,641,832
 
   Total Liabilities                                                               12,548,692       12,474,903
 

Minority interests in Local Limited Partnerships                                      905,393          907,515

General, Initial and Investor Limited Partners' Equity                             22,558,378       23,748,605
Net unrealized gains on marketable securities                                             799              764
     Total Partners' Equity                                                        22,559,177       23,749,369
     Total Liabilities and Partners' Equity                                     $  36,013,262    $  37,131,787


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

</TABLE>

<PAGE>

                                  COMBINED STATEMENTS OF OPERATIONS
                                               (Unaudited)
                           For the Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>



                                                                         1998                   1997     
<S>                                                                  <C>                    <C>
Revenue:
    Rental                                                           $     579,906          $    607,046
    Investment                                                               8,606                 9,729
    Other                                                                   67,885               118,465
      Total Revenue                                                        656,397               735,240

Expenses:
    Asset management fees, related party                                    95,938               109,095
    General and administrative includes
      reimbursements to affiliates of $32,550 and
      $58,855 in 1998 and 1997, respectively                               113,072               122,829
    Bad debt (recovery)                                                    (26,881)               11,836
    Property management fees                                                50,154                42,225
    Rental operations, exclusive of depreciation                           345,155               459,904
    Interest                                                               212,791               247,776
    Depreciation                                                           166,192               191,112
    Amortization                                                            44,303                46,298
      Total Expenses                                                     1,000,724             1,231,075

Loss before equity in losses of
    Local Limited Partnerships                                            (344,327)             (495,835)

Equity in losses of Local Limited Partnerships                            (848,022)             (751,196)

Minority interest in losses of
    Local Limited Partnerships                                               2,122                 2,884


Net Loss                                                             $  (1,190,227)         $ (1,244,147)

Net Loss allocated:
    To General Partners                                              $     (11,902)         $    (12,441)
    To Limited Partners                                                 (1,178,325)           (1,231,706)
                                                                     $  (1,190,227)         $ (1,244,147)

Net Loss per Limited Partnership Unit
    (100,000 Units)                                                  $     (11.78)          $     (12.32)


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

</TABLE>

<PAGE>
               COMBINED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                                         (Unaudited)
                         For the Three Months Ended June 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

Net change in net unrealized
   gains on marketable
   securities available for sale                -             -                  -            35              35

Net Loss                                  (11,902)            -         (1,178,325)            -      (1,190,227)

Balance at June 30, 1998              $  (650,261)     $  5,000       $ 23,203,639    $      799   $  22,559,177


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

<PAGE>
                                   COMBINED STATEMENTS OF CASH FLOWS
                                               (Unaudited)
                           For the Three Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>


                                                                          1998                     1997    

<S>                                                                   <C>                      <C>          
Net cash used for operating activities                                $    (80,525)            $   (143,987)

Cash flows from investing activities:
    Advances to affiliates                                                 (41,269)                 (57,497)
    Purchases of marketable securities                                           -                 (124,573)
    Proceeds from sales and maturities of
      marketable securities                                                 50,000                   51,439
    Cash distributions received from Local
      Limited Partnerships                                                 268,748                  179,290
    Deposits to replacement reserves                                       (14,819)                  (4,636)
    Additions to rental property                                           (45,378)                      -
Net cash provided by investing activities                                  217,282                   44,023

Cash flows from financing activities:
    Repayment of mortgage notes payable                                    (27,119)                 (32,610)
    Advances from affiliate                                                 68,150                  116,526
    Advances on notes payable, affiliate                                         -                   58,854
       Net cash provided by financing activities                            41,031                  142,770

Net increase in cash and cash equivalents                                  177,788                   42,806

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

Cash and cash equivalents, ending                                     $    489,655             $    422,420

Supplemental Disclosure:
     Cash paid for interest                                           $    195,058             $    196,648
 

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


<PAGE>
                                                        
                                    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 about the Local Limited Partnerships that is included in the  
accompanying  financial statements is as of March 31, 1998 and 1997.

1.   Investments in Local Limited Partnerships

The  Partnership  uses the equity  method to account  for its limited partner
interests in fifty Local Limited Partnerships (excluding the Combined  Entities)
which own and operate multi-family housing complexes, most of which are  
government-assisted.  The Partnership, as Investor Limited Partner pursuant to
the various Local Limited Partnership Agreements which contain certain operating
and distribution restrictions, has generally acquired a 99% interest in the 
profits, losses, tax credits and cash flows from operations of each of the Local
Limited Partnerships, except for Granite,  Colony Apartments and Harbour View, 
where the Partnership's ownership interest is 97%, 49% and 48.96%, respectively.
Upon dissolution,  proceeds will be distributed according to each respective 
partnership agreement.

The following is a summary of Investments in Local Limited Partnerships at June 
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 $27,099,307)                                                (41,687,359)

Cumulative cash distributions received from Local Limited Partnerships                            (2,525,459)

Investments in Local Limited Partnerships before adjustment                                       15,638,991

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   6,430,577

   Accumulated amortization of acquisition fees and expenses                                      (1,449,366)

Investments in Local Limited Partnerships                                                         20,620,202

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               $  18,985,202
</TABLE>

<PAGE>
                        NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                          (Unaudited)


1.   Investments in Local Limited Partnerships (continued)

The Partnership's share of the net losses of the Local Limited Partnerships, 
excluding the Combined Entities, for the three months ended June 30, 1998 is  
$2,024,632.  For the three months ended June 30, 1998,  the  Partnership has not
recognized $1,180,147 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

The Financial Accounting Standards Board recently issued Statement of Financial
Accounting  Standards No. 130, Reporting Comprehensive Income.  The Partnership 
has adopted the new  standard  effective  April 1, 1998.  The adoption of this 
standard had no effect on the  Partnership's net income or partner's  equity.  
Comprehensive  loss was  $1,190,192 and $1,242,205  for the quarters  ended 
June 30, 1998 and 1997,  respectively.  Comprehensive  loss includes the change 
in net unrealized gains and losses on marketable securities available for sale 
of $35 and $1,942 for the quarters ended June 30, 1998 and 1997, respectively.

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  and Sherwood Arms Housing were  transferred  prior to 
March 31, 1997.  Lone Oak Apartments, Hallet West Apartments and Lakeway Colony 
were  transferred on August 6, 1997,  September 23, 1997 and October  30,  1997,
respectively.  Crestwood  Place,  Eagle  Nest  Apartments, One Main Place and  
Pilot  Point Apartments were  transferred on October 28, 1997. If negotiations  
continue as expected,  transfer of the remaining property  will occur during 
1998.  This  property, with a carrying  value of $762,081,  incurred a loss of 
$38,945 during the three  months ended  March 31, 1998.  Until the  property is 
transferred,  operating  deficits  will continue to be funded from Partnership  
Reserves.  For tax purposes,  these events will result in both Section 1231 gain
and cancellation of indebtedness income.  In addition, the transfer of ownership
will result in a nominal amount of recapture of tax credits  because the Texas  
Partnerships  represent  only 2% of the  Partnership's  tax credits.


<PAGE>
                    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                      $     399,924    $      89,731     $           -    $     489,655
Marketable securities, at fair value                 225,512                -                 -          225,512
Investments in Local Limited
   Partnerships, net                              22,118,625                -        (3,133,423)      18,985,202
Accounts receivable, net                             805,934           99,930          (805,934)          99,930
Interest receivable                                    6,903                -                 -            6,903
Notes receivable                                   1,406,251                -        (1,406,251)               -
Prepaid expenses                                       6,486            8,283                 -           14,769
Tenant security deposits                                   -           79,562                 -           79,562
Replacement reserves                                       -          209,490                 -          209,490
Rental property at cost, net of
   accumulated depreciation                                -       15,330,305                 -       15,330,305
Deferred acquisition fees escrow                     225,000                -                 -          225,000
Deferred expenses, net                                     -          202,574                 -          202,574
Other assets                                               -          144,360                 -          144,360
     Total Assets                              $  25,194,635    $  16,164,235     $  (5,345,608)   $  36,013,262

Liabilities and Partners' Equity
Accounts payable to affiliates                 $   1,671,469    $     822,238     $    (805,934)   $   1,687,773
Accounts payable and accrued
   expenses                                          224,021          350,585                 -          574,606
Interest payable                                           -          329,824                 -          329,824
 
Notes payable, affiliate                             514,968                -                 -          514,968
Security deposits payable                                  -           78,762                 -           78,762
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                                     -       10,020,964        (1,406,251)       8,614,713
     Total Liabilities                             2,635,458       12,125,419        (2,212,185)      12,548,692

Minority interest in Local
   Limited Partnerships                                    -                -           905,393          905,393 

General, Initial and Investor Limited
   Partners' Equity                               22,558,378        4,038,816        (4,038,816)      22,558,378
 
Net unrealized losses on marketable
   securities                                            799               -                  -              799
     Total Partners' Equity                       22,559,177        4,038,816        (4,038,816)      22,559,177 
     Total Liabilities and
     Partners' Equity                          $  25,194,635    $  16,164,235     $  (5,345,608)   $  36,013,262 

(A)  As of June 30, 1998.
(B)  As of March 31, 1998.
</TABLE>

<PAGE>
                    NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
                                             (Unaudited)

4.   Supplemental Combining Schedules (continued)

                                             Statements of Operations

<TABLE>
<CAPTION>

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

Revenue:
<S>                                         <C>                 <C>               <C>              <C>          
   Rental                                   $              -    $     579,906     $           -    $     579,906
   Investment                                          6,881            1,725                 -            8,606
   Other                                              29,386           38,499                 -           67,885 
     Total Revenue                                    36,267          620,130                 -          656,397

Expenses:
   Asset management fees, related party               95,938                -                 -           95,938
   General and administrative                        113,072                -                 -          113,072
 
   Bad debt recovery                                 (26,881)               -                 -          (26,881)
   Property management fees                                -           50,154                 -           50,154
   Rental operations, exclusive
     of depreciation                                       -          345,155                 -          345,155
 
   Interest                                            1,500          211,291                 -          212,791
   Depreciation                                            -          166,192                 -          166,192
   Amortization                                       37,750            6,553                 -           44,303 
     Total Expenses                                  221,379          779,345                 -        1,000,724 

Loss before equity in losses of Local
   Limited Partnerships                             (185,112)        (159,215)                -         (344,327)

Equity in losses of Local Limited
   Partnerships                                   (1,005,115)               -           157,093         (848,022)

Minority interest in losses of Local
   Limited Partnerships                                    -                -             2,122            2,122

Net Loss                                    $     (1,190,227)   $    (159,215)    $     159,215    $  (1,190,227) 


(A) For the three months ended June 30, 1998.
(B) For the three months ended March 31, 1998.
</TABLE>

<PAGE>
                 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 used for
<S>                                            <C>              <C>               <C>              <C>            
   operating activities                        $     (90,124)   $        9,599    $           -    $     (80,525) 

Cash flows from investing activities:
   Advances to affiliates                            (41,269)                -                -          (41,269)
   Proceeds from sales and maturities
     of marketable securities                         50,000                 -                -           50,000
Cash distributions received from
     Local Limited Partnerships                      268,748                 -                -          268,748
   Deposits to replacement reserves                        -           (14,819)               -          (14,819)
   Additions to rental property                            -           (45,378)               -          (45,378) 
Net cash provided by (used for)
   investing activities                              277,479           (60,197)               -          217,282 

Cash flows from financing
activities:
   Repayment of mortgage notes
      payable                                              -           (27,119)               -          (27,119)
   Advances from affiliate                                 -            68,150                -           68,150
Net cash provided by
   financing activities                                    -            41,031                -           41,031 

Net increase (decrease) in cash
   and cash equivalents                              187,355            (9,567)               -          177,788
 

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

Cash and cash equivalents,
   ending                                      $     399,924    $       89,731    $           -    $     489,655 


(A)  For the three months ended June 30, 1998.
(B) For the three months ended March 31, 1998.

</TABLE>


<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 June 30, 1998, the Partnership,  including the Combined  Entities,  had cash
and cash equivalents of $489,655 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,  
improvements 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 June 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  $1,653,000  
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 $1,181,000 (net of paydowns) to purchase the mortgage of a Local 
Limited  Partnership.  To date,  the  Partnership has used  approximately  
$1,501,000 of operating funds to replenish Reserves.  At June 30, 1998,  
approximately $559,000 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 $646,000 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 June 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 three months ended June 30, 1998.

Results of Operations

For the three months ended June 30, 1998,  Partnership  operations resulted in a
net loss of $1,190,227 as compared to a net loss of  $1,244,147  for the same 
period in 1997.  The decrease in net loss is primarily  attributable  to
decreases in rental  operations,  interest and depreciation  expenses, partially
offset by decreases in rental and other revenue due to the transfer of six of 
the Combined  Entities.  One additional  Combined Entity is expected to be  
transfered in fiscal  1999.  These decreases in net loss are partially offset by
an increase in equity in losses of Local Limited  Partnerships due to increases 
in property operating  expenses.  Operating expenses are not expected to 
continue to increase.



<PAGE>


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

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


Property Discussions

Prior to the transfer of the Texas Partnerships,  Limited Partnership interests 
had been acquired in sixty-nine Local Limited Partnerships which own and operate
rental properties in twenty-four  states.  Forty-two of the properties,  
totaling 3,935 units, were rehabilitated, and twenty-seven  properties,  
consisting of 1,614 units, were  newly  constructed.  All  of the  properties  
have  completed  construction  or  rehabilitation  and  initial lease-up.  Many 
of the remaining  fifty-five 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 Local General Partner is requesting that the Managing General 
Partner assist in funding capital improvements. The Managing General Partner is 
reviewing this request and has requested that the Local General Partner provide 
a workout plan detailing  where and how these funds will be used.  In  
addition,  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.

Columbia Townhomes,  located in Des Moines, Iowa has been experiencing  
operating deficits.  As of June 30, 1998, occupancy was 100%.  Currently,  the 
Local General Partner has 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 or  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 progress.

As previously  reported,  operations had been improving at Pleasant Plaza, 
located in Malden,  Massachusetts,  as a result of the 1995 SHARP  subsidy  
restructuring.  The SHARP  mortgage  subsidy has been an  important  part of the
property's annual income.  However,  effective  October 1, 1997, the  
Massachusetts Housing Finance Agency (MHFA), which  provided the SHARP  
subsidies, withdrew future SHARP  mortgage  subsidies  from its  portfolio of 
77 SHARP subsidized properties.  The Managing General Partner joined a group of
interested parties and is working with MHFA to find a solution to the problems
that will result from the  withdrawn  subsidies.  Given the  dependence  on the
mortgage  subsidy,  it is possible that the property will default on its 
mortgage  obligation.  It is possible that Partnership  Reserves  will be used 
to support the property  until these issues can be resolved.  The Local General
Partner  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  believes it will cover the SHARP


<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)

subsidy  gap by  increasing  rents and some cost  containments.  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.

Another property affected by the withdrawal of the SHARP subsidies is South  
Holyoke,  located  in  Holyoke, Massachusetts.  As previously reported, this 
property  continues to experience  occupancy problems resulting from
increased market  competition and local economic  conditions.  The management 
agent, which is currently funding the deficits, is trying to address these 
problems through a combination of increased  advertising,  community outreach
and tighter expense monitoring.

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 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 closely 
monitoring operations.

Willow Lake, located in Kansas, is experiencing  operating  difficulties due to 
soft rental market  conditions.  As previously reported,  the Managing General  
Partner  negotiated a three year  extension to the original  workout agreement. 
The three year extension  will expire 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, 
the Lender and prospective buyer for the remaining  Texas  Partnership,  
Willowick,  are continuing and a transfer is expected in 1998. In the meantime,
operating  deficits  continue to be funded from Partnership  Reserves.  For tax 
purposes,  these events will result in both Section 1231 gain and  cancellation 
of  indebtedness  income.  In addition,  the transfer of ownership will result 
in a nominal  amount of recapture of tax credits  because the Texas Partnerships
represent  only 2% of the Partnership's tax credits.

In accordance with Financial  Accounting Standard No. 121,  "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived  Assets to Be Disposed Of", 
which is effective for fiscal years  beginning  after December 15, 1995,
the  Partnership  has  implemented  policies and practices  for assessing  
impairment of its real estate assets and investments  in local  limited  
partnerships.  Each asset is  analyzed by real estate  experts to  determine  if
an impairment indicator exists.  If so, the carrying value is  compared  to the 
future cash flows  expected to be derived  from the asset.  If the total  
undiscounted cash flows are less than the carrying  value,  a provision to
write down the asset to fair value will be charged against income.



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




PART II       OTHER INFORMATION

Items 1-5     Not applicable

Item 6        Exhibits and reports on Form 8-K
 
                (a)Exhibits - None

                (b)Reports on Form 8-K - No reports on Form 8-K were filed 
                   during the quarter ended June 30, 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: August 13, 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>