February 11, 1999




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 December 31, 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-Q3.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           December 31, 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 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 - December 31, 1998 (Unaudited)
           and March 31, 1998                                               1

         Combined Statements of Operations (Unaudited) - For the Three 
           and Nine Months Ended December 31, 1998 and 1997                 2

         Combined Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Nine Months Ended December 31, 1998        3

         Combined Statements of Cash Flows (Unaudited) -  For the
           Nine Months Ended December 31, 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 - December 31, 1998 and March 31, 1998

<TABLE>
<CAPTION>

                                                                                 December 31,        March 31,
                                                                                    1998               1998
                                                                                  (Unaudited)
Assets
                                                                                -------------    -------------
<S>                                                                             <C>              <C>          
Cash and cash equivalents                                                       $     733,030    $     311,867
Marketable securities, at fair value                                                  300,843          275,387
Investments in Local Limited Partnerships, net of reserve
   for valuation of $1,635,000 (Note 1)                                            16,768,636       19,319,502
Accounts receivable, net of allowance for bad
   debt of $42,610 and $77,010, respectively                                          165,134           90,467
Interest receivable                                                                     4,821           13,298
Prepaid expenses                                                                       30,885           25,247
Tenant security deposits                                                               86,682           68,292
Replacement reserves                                                                  232,141          194,671
Rental property at cost, net of accumulated
   depreciation                                                                    15,064,244       16,267,802
Deferred acquisition fees escrow                                                      112,500          225,000
Deferred expenses, net of $124,511 and $104,540
   of accumulated amortization, respectively                                          191,962          209,127
Other assets                                                                          189,374          131,127
                                                                                -------------    -------------
     Total Assets                                                               $  33,880,252    $  37,131,787
                                                                                =============    =============

Liabilities and Partners' Equity

Accounts payable to affiliates                                                  $   1,879,307    $   1,702,519
Accounts payable and accrued expenses                                                 594,709          484,817
Interest payable                                                                      301,817          312,091
Note payable, affiliate                                                               514,968          514,968
Security deposits payable                                                              77,576           70,630
Due to affiliate                                                                      323,046          323,046
Deferred acquisition fees payable                                                     112,500          225,000
General Partner advances                                                              200,000          200,000
Mortgage notes payable                                                              7,445,430        8,641,832
                                                                                -------------    -------------
     Total Liabilities                                                             11,449,353       12,474,903
                                                                                -------------    -------------

Minority interest in Local Limited Partnerships                                       907,447          907,515
                                                                                -------------    -------------

General, Initial and Investor Limited Partners' Equity                             21,522,504       23,748,605
Net unrealized gains on marketable securities                                             948              764
                                                                                -------------    -------------
     Total Partners' Equity                                                        21,523,452       23,749,369
                                                                                -------------    -------------
     Total Liabilities and Partners' Equity                                     $  33,880,252    $  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 Nine Months Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                        Three Months Ended                  Nine Months Ended
                                                  December 31,      December 31,      December 31,     December 31,
                                                      1998              1997              1998             1997
                                                 --------------   ---------------   --------------     ------------

Revenue:
<S>                                               <C>              <C>               <C>               <C>         
   Rental                                         $    594,032     $     619,190     $  1,794,205      $  1,868,953
   Investment                                           12,008            10,176           29,894            31,451
   Other                                               410,139            34,287          491,402           193,661
                                                  ------------     -------------     ------------      ------------
     Total Revenue                                   1,016,179           663,653        2,315,501         2,094,065
                                                  ------------     -------------     ------------      ------------

Expenses:
   Asset management fees, related party                 95,938           109,095          287,814           327,285
   General and administrative (includes
     reimbursements to affiliates of $100,157
     and $135,989 in 1998 and 1997, respectively)       96,085           138,783          293,097           380,417
   Bad debt                                              5,165           690,469          102,069           754,636
   Rental operations, exclusive of depreciation        378,702           409,452        1,076,051         1,263,861
   Property management fees                             29,115            43,797          108,608           131,987
   Interest                                            180,149           212,401          574,723           677,102
   Depreciation                                        155,296           200,925          476,827           596,022
   Amortization                                         44,569            40,751          133,129           133,348
                                                  ------------     -------------     ------------      ------------
     Total Expenses                                    985,019         1,845,673        3,052,318         4,264,658
                                                  ------------     -------------     ------------      ------------

Income (loss) before equity in losses of Local 
   Limited Partnerships, minority interest, loss 
   on liquidation of interests in Local Limited 
   Partnerships and extraordinary items                 31,160        (1,182,020)        (736,817)       (2,170,593)

Equity in losses of Local Limited Partnerships
   (Note 1)                                           (570,195)         (838,977)      (2,129,535)       (2,130,935)

Minority interest in losses of Local Limited
   Partnerships                                          2,415           135,249               68           146,100

Loss on liquidation of interests in Local Limited
   Partnerships (Note 3)                                     -           (12,835)          (4,835)          (18,251)
                                                  ------------     -------------     ------------      ------------

Net Loss before extraordinary items                   (536,620)       (1,898,583)      (2,871,119)       (4,173,679)

Extraordinary gain on cancellation of
   indebtedness (Note 3)                                     -         1,789,885          645,018         1,868,051
                                                  ------------     -------------     ------------      ------------


Net Loss                                          $   (536,620)    $    (108,698)    $ (2,226,101)     $ (2,305,628)
                                                  ============     =============     ============      ============

Net Loss allocated:
   To General Partners                            $     (5,366)    $      (1,087)    $    (22,261)     $    (23,056)
   To Limited Partners                                (531,254)         (107,611)      (2,203,840)       (2,282,572)
                                                  ------------     -------------     ------------      ------------
                                                  $   (536,620)    $    (108,698)    $ (2,226,101)     $ (2,305,628)
                                                  ============     =============     ============      ============

Net Loss before extraordinary items per
   Limited Partnership Unit (100,000 Units)       $      (5.31)    $     (18.80)     $     (28.43)     $    (41.32)
                                                  ============     ============      ============      ===========

Extraordinary items per Limited Partnership
   Unit (100,000 Units)                           $          -     $       17.72     $       6.39      $      18.49
                                                  ============     =============     ============      ============

Net Loss per Limited Partnership Unit
   (100,000 Units)                                $     (5.31 )    $       (1.08)    $     (22.04)     $    (22.83)
                                                  ============     =============     ============      ===========
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 Nine Months Ended December 31, 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                               (22,261)            -         (2,203,840)            -      (2,226,101)
   Change in net unrealized
   gains on marketable securities
   available for sale                           -             -                  -           184             184
                                      -----------       -------       ------------    ----------   -------------
Comprehensive Loss                        (22,261)            -         (2,203,840)          184      (2,225,917)
                                      -----------       -------       ------------    ----------   -------------

Balance at
   December 31, 1998                  $  (660,620)     $  5,000       $ 22,178,124    $      948   $  21,523,452
                                      ===========      ========       ============    ==========   =============


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 Nine Months Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>


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

<S>                                                                          <C>                 <C>            
Net cash provided by (used for) operating activities                         $       230,130     $     (185,016)
                                                                             ---------------     --------------

Cash flows from investing activities:
    Advances to affiliates                                                           (89,138)          (317,709)
    Repayment of notes receivable, affiliate                                           6,694             17,002
    Purchases of marketable securities                                              (447,890)          (373,539)
    Proceeds from sales and maturities of
      marketable securities                                                          422,905            420,313
    Cash distributions received from Local
      Limited Partnerships                                                           385,633            315,906
    Decrease in deferred acquisition fee escrow                                      112,500            112,500
    Payment of deferred acquisition fee                                             (112,500)          (112,500)
    Deposits to replacement reserves                                                 (37,889)            35,020
    Additions to rental property                                                     (62,219)          (197,866)
                                                                             ---------------     --------------
       Net cash provided by (used for) investing activities                          178,096           (100,873)
                                                                             ---------------     --------------

Cash flows from financing activities:
    Repayment of mortgage notes payable                                              (52,407)           (86,431)
    Addition to deferred expenses                                                     (2,806)                 -
    Advances from affiliate                                                           68,150            149,119
                                                                             ---------------     --------------
       Net cash provided by financing activities                                      12,937             62,688
                                                                             ---------------     --------------

Net increase (decrease) in cash and cash equivalents                                 421,163           (223,201)

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

Cash and cash equivalents, ending                                            $       733,030     $      156,413
                                                                             ===============     ==============

Supplemental Disclosure:
    Cash paid for interest                                                   $       594,508     $      673,382
                                                                             ===============     ==============

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 September 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 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
December 31, 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 $29,392,851)                                                (42,916,982)

Cumulative cash distributions received from Local Limited Partnerships                            (2,642,344)
                                                                                               -------------

Investments in Local Limited Partnerships before adjustment                                       14,292,483

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                                                   5,398,026

   Accumulated amortization of acquisition fees and expenses                                      (1,286,873)
                                                                                               -------------

Investments in Local Limited Partnerships                                                         18,403,636

Reserve for valuation of investments in Local Limited Partnerships                                (1,635,000)
                                                                                               -------------
                                                                                               $  16,768,636
                                                                                               -------------
</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 nine months ended December 31, 1998 is
$5,547,799. For the nine months ended December 31, 1998, the Partnership has not
recognized  $3,473,691  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                      $     639,599    $      93,431     $           -    $     733,030
Marketable securities, at fair value                 300,843                -                 -          300,843
Investments in Local Limited
   Partnerships, net                              21,079,361                -        (4,310,725)      16,768,636
Accounts receivable, net                             724,853           93,982          (653,701)         165,134
Interest receivable                                    4,821                -                 -            4,821
Notes receivable                                   1,389,038                -        (1,389,038)               -
Prepaid expenses                                       3,359           27,526                 -           30,885
Tenant security deposits                                   -           86,682                 -           86,682
Replacement reserves                                       -          232,141                 -          232,141
Rental property at cost, net of
   accumulated depreciation                                -       14,274,429           789,815       15,064,244
Deferred acquisition fees escrow                     112,500                -                 -          112,500
Deferred expenses, net                                     -          191,962                 -          191,962
Other assets                                               -          189,374                 -          189,374
                                               -------------    -------------     -------------    -------------
     Total Assets                              $  24,254,374    $  15,189,527     $  (5,563,649)   $  33,880,252
                                               =============    =============     =============    =============

Liabilities and Partners' Equity
Accounts payable to affiliates                 $   1,864,510    $     668,498     $    (653,701)   $   1,879,307
Accounts payable and accrued
   expenses                                          238,944          355,765                 -          594,709
Interest payable                                           -          301,817                 -          301,817
Note payable, affiliate                              514,968                -                 -          514,968
Security deposits payable                                  -           77,576                 -           77,576
Due to affiliate                                           -          323,046                 -          323,046
Deferred acquisition fees payable                    112,500                -                 -          112,500
General partner advances                                   -          200,000                 -          200,000
Mortgage notes payable                                     -        8,834,468        (1,389,038)       7,445,430
                                               -------------    -------------     -------------    -------------
     Total Liabilities                             2,730,922       10,761,170        (2,042,739)      11,449,353
                                               -------------    -------------     -------------    -------------

Minority interest in Local
   Limited Partnerships                                    -                -           907,447          907,447
                                               -------------    -------------     -------------    -------------

General, Initial and Investor Limited
   Partners' Equity                               21,522,504        4,428,357        (4,428,357)      21,522,504
Net unrealized gains on marketable
   securities                                            948                -                 -              948
                                               -------------    -------------     -------------    -------------
     Total Partners' Equity                       21,523,452        4,428,357        (4,428,357)      21,523,452
                                               -------------    -------------     -------------    -------------
     Total Liabilities and
       Partners' Equity                        $  24,254,374    $  15,189,527     $  (5,563,649)   $  33,880,252
                                               =============    =============     =============    =============
</TABLE>

(A) As of December 31, 1998. 
(B) As of September 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 December 31, 1998


                                               Boston Financial
                                              Qualified Housing     Combined
                                                 Tax Credits        Entities                         Combined
                                                L.P. III (A)           (B)         Eliminations         (A)
                                                ------------    -------------     -------------   --------------
Revenue:
<S>                                             <C>             <C>               <C>              <C>          
   Rental                                       $          -    $     594,032     $           -    $     594,032
   Investment                                          9,248            2,760                 -           12,008
   Other                                             400,753           31,220           (21,834)         410,139
                                                ------------    -------------     -------------    -------------
     Total Revenue                                   410,001          628,012           (21,834)       1,016,179
                                                ------------    -------------     -------------    -------------

Expenses:
   Asset management fees, related party               95,938                -                 -           95,938
   General and administrative                         96,085                -                 -           96,085
   Bad debt                                            5,165                -                 -            5,165
   Rental operations, exclusive of depreciation            -          378,702                 -          378,702
   Property management fee                                 -           29,115                 -           29,115
   Interest                                            1,000          200,983           (21,834)         180,149

   Depreciation                                            -          155,296                 -          155,296
   Amortization                                       37,704            6,865                 -           44,569
                                                ------------    -------------     -------------    -------------
     Total Expenses                                  235,892          770,961           (21,834)         985,019
                                                ------------    -------------     -------------    -------------

Income (loss) before equity in losses of Local  
   Limited Partnerships, minority interest, loss 
   on liquidation of interest in Local Limited 
   Partnership and extraordinary item                174,109         (142,949)                -           31,160

Equity in losses of Local Limited
   Partnerships                                     (710,729)               -           140,534         (570,195)

Minority interest in losses of
   Local Limited Partnerships                              -                -             2,415            2,415

Loss on liquidation of interest in Local
   Limited Partnership                                     -                -                 -                -
                                                ------------    -------------     -------------    -------------

Net loss before extraordinary item                  (536,620)        (142,949)          142,949         (536,620)

Extraordinary gain on cancellation of
   indebtedness                                            -                -                 -                -
                                                ------------    -------------     -------------    -------------

Net Income (Loss)                               $   (536,620)   $    (142,949)    $     142,949    $    (536,620)
                                                ============    =============     =============    =============
</TABLE>

(A) For the three months ended December 31, 1998. 
(B) For the three months ended September 30, 1998.
<PAGE>
   

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

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

                                                   Statements of Operations
                                         For the Nine Months Ended December 31, 1998


                                               Boston Financial
                                              Qualified Housing     Combined
                                                 Tax Credits        Entities                          Combined
                                                L.P. III (A)           (B)         Eliminations          (A)
                                                ------------    -------------     -------------    ------------
Revenue:
<S>                                             <C>             <C>               <C>              <C>         
   Rental                                       $          -    $   1,794,205     $           -    $  1,794,205
   Investment                                         24,715            5,179                 -          29,894
   Other                                             453,798           81,807           (44,203)        491,402
                                                ------------    -------------     -------------    ------------
     Total Revenue                                   478,513        1,881,191           (44,203)      2,315,501
                                                ------------    -------------     -------------    ------------

Expenses:
   Asset management fees, related party              287,814                -                 -         287,814
   General and administrative                        293,097                -                 -         293,097
   Bad debt                                          102,069                -                 -         102,069
   Rental operations, exclusive of depreciation            -        1,076,051                 -       1,076,051
   Property management fee                                 -          108,608                 -         108,608
   Interest                                            4,500          614,426           (44,203)        574,723
   Depreciation                                            -          476,827                 -         476,827
   Amortization                                      113,158           19,971                 -         133,129
                                                ------------    -------------     -------------    ------------
     Total Expenses                                  800,638        2,295,883           (44,203)      3,052,318
                                                ------------    -------------     -------------    ------------

Loss before equity in losses of Local Limited  
   Partnerships, minority interest, loss on 
   liquidation of interest in Local Limited   
   Partnership and extraordinary item               (322,125)        (414,692)                -        (736,817)

Equity in losses of Local Limited
   Partnerships                                   (1,899,141)               -          (230,394)     (2,129,535)

Minority interest in losses of
   Local Limited Partnerships                              -                -                68              68

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

Net loss before extraordinary item                (2,226,101)        (414,692)         (230,326)     (2,871,119)

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

Net Income (Loss)                               $ (2,226,101)   $     230,326     $    (230,326)   $ (2,226,101)
                                                ============    =============     =============    ============
</TABLE>

(A) For the nine months ended December 31, 1998.  
(B) For the nine months ended September 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)
                                               --------------   --------------    -------------    -------------
<S>                                            <C>              <C>               <C>              <C>          
Net cash provided by operating activities      $     138,307    $       91,823    $           -    $     230,130
                                               --------------   --------------    -------------    -------------

Cash flows from investing activities:
   Advances to affiliates                            (89,138)                -                -          (89,138)
   Repayment of notes receivable, affiliate           17,213                 -          (10,519)           6,694
   Purchases of marketable securities               (447,890)                -                -         (447,890)
   Proceeds from sales and maturities
     of marketable securities                        422,905                 -                -          422,905
   Cash distributions received from
     Local Limited Partnerships                      385,633                 -                -          385,633
   Deposits to replacement reserves                        -           (37,889)               -          (37,889)
   Decrease in deferred acquisiton fee escrow        112,500                 -                -          112,500
   Payment of deferred acquisition fee              (112,500)                -                -         (112,500)
   Additions to rental property                            -           (62,219)               -          (62,219)
                                               -------------    --------------    -------------    -------------
Net cash provided by (used for)
   investing activities                              288,723          (100,108)         (10,519)         178,096
                                               -------------    --------------    -------------    -------------

Cash flows from financing activities:
   Repayment of mortgage notes
      payable                                              -           (62,926)          10,519          (52,407)
   Additions to deferred expenses                          -            (2,806)               -           (2,806)
   Advances from affiliate                                 -            68,150                -           68,150
                                               -------------    --------------    -------------    -------------
Net cash provided by
   financing activities                                    -             2,418           10,519           12,937
                                               -------------    --------------    -------------    -------------

Net increase (decrease) in cash
   and cash equivalents                              427,030            (5,867)               -          421,163

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

Cash and cash equivalents,
   ending                                      $     639,599    $       93,431    $           -    $     733,030
                                               =============    ==============    =============    =============

</TABLE>

(A) For the nine months ended December 31, 1998.  
(B) For the nine months 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


Liquidity and Capital Resources

At December 31, 1998, the Partnership, including the Combined Entities, had cash
and cash  equivalents of $733,030 as compared to $311,867 at March 31, 1998. The
increase is primarily  attributable  to cash  distributions  received from Local
Limited   Partnerships,   proceeds  from  sales  and  maturities  of  marketable
securities and cash provided by operations.  The increase is partially offset by
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
December 31, 1993, the Managing  General Partner decided to increase the Reserve
level to  3.75%.  Funds  approximating  $195,000  have been  withdrawn  from the
Reserves to pay legal and other costs. Additionally,  professional fees relating
to various property issues totaling approximately $1,716,000 have been paid from
Reserves.   This  amount  includes   approximately   $1,313,000  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 $1,091,000 (net
of paydowns) to purchase the mortgage of a Local Limited  Partnership.  To date,
the  Partnership  has  used  approximately  $1,871,000  of  operating  funds  to
replenish Reserves. At December 31, 1998,  approximately  $882,000 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 $1,313,000  noted above,  the  Partnership  has also advanced
approximately  $622,000 to the Texas  Partnerships  and  $766,000 to three 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 December 31, 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 nine months ended December 31, 1998.

Results of Operations

The  Partnership's  results of  operations  for the three months and nine months
ended  December  31, 1998,  resulted in net losses of $536,620  and  $2,226,101,
respectively,  as compared to net losses of $108,698 and $2,305,628 for the same
respective  periods in 1997.  The  increase  in net  losses for the three  month
period  is  primarily   attributable   to  the   Partnership's   recognition  of
extraordinary  gain on  cancellation  of debt in the  fourth  quarter  of  1997,
partially offset by an increase in other revenue as a result of a refinancing at
one of the Combined  Entities during the fourth quarter of 1998. The decrease in
net losses for the nine month period is primarily  attributable to a decrease in
property  operating  expenses,  general and administrative  expenses,  bad debt,
interest, depreciation and amortization expenses, partially offset by a decrease
in rental revenue due to the transfer of seven of the Combined Entities in 1997.


<PAGE>

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

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


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.  Given the
severity of the operating deficits, it is possible that the Partnership will not
be able to retain its interest in the property through 1999. A foreclosure would
result in recapture of credits for  investors,  the allocation of taxable income
to the Partnership  and loss of future  benefits  associated with this property.
The  Managing  General  Partner is working  with the Local  General  Partner and
lender to  restructure  the current  debt.  Negotiations  between  the  Managing
General Partner and Local General  Partner and lender 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 September 30, 1998 was 93%.

As previously reported, 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 still 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

<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)

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. 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.

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 had successfully  negotiated a Drug Elimination Grant (NOFA) for
Shoreline.  Waterfront  was turned down for the NOFA grant.  However,  they will
reapply this year. The Shoreline  grant was to be funded during 1998 and 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 nine year extension to the original workout agreement.  The
nine 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 December 31, 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:    February 11, 1999            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>