San Francisco will now lend as much as $200,000 to some homebuyers toward a down payment on their first house or condominium.
Mayor Ed Lee's decision to double the previous limit of $100,000 was intended to help middle-class residents who have been hit hard by the housing crunch.
The new loan limit goes into effect this month, The San Francisco Chronicle reported Monday.
The move came as the medium home price in the city reached $925,000 due to low supply and high demand, especially among the city's influx of well-paid technology workers. The city said the previous loan limit is now too low to do much good.
The increased limit will be available to people who make up to 120 percent of the city's median income, which is currently $116,500 for a family of four.
"Our city's middle class is deeply affected by the housing crunch -- they make too much to qualify for our traditional affordable housing, but not enough to afford much of the new market-rate construction,'' Lee said.
When a borrower sells or refinances, the loan has to be paid off along with a percentage of the property's appreciation. The money is then returned to the loan pool.
The mayor's office said the fund has provided $14.7 million in loans since it was launched in 1998. Some $12 million in loan repayments and appreciation have flowed back into the fund.
Melissa deKelaita, 29, bought a small one-bedroom apartment in 2012 after her real estate agent told her about the program.
"I was able to achieve and do something that I never thought I'd be able to do at this point in my life by myself,'' deKelaita said.