Sounds nice ... but if it costs one developer $4000 a month just to take care of bills/rent/food and it costs the other $1000 then that is hardly fair. You are penalizing one developer based on the cost of living of the city they happen to be in.
In this world of airplanes and shipping services, there's no non-medical non-legal reason why you're stuck in any particular expensive city. Choosing to live in a big expensive city is an expense choice that you make, just like buying a premium brand.
jobs? especially in the computer industry.
You assume the person living in the expensive city doesn't benefit from doing so. Folks living in San Francisco choose to do so because they find the trade-off worthwhile. I choose to live in a relatively high cost-of-living area because I love the benefits it has.