A lot of the discussions here never mentioned one issue that might arise if the companies didn't adjust for CoLiving:

What would happened to the existing employees of the same company that already accepted lower salary for being in LCOL?

Google Mountain View pays differently than other Google branches (heck for a while, the pay in Google Seattle was slightly lower compare to HQ).

Now you have Google Señor Developer in LCOL accepted the fact that they get paid less than their compadre in Mtn View, but your Mtn View compadre decided to be your neighbour while refusing your level of pay. Wouldn't that create tension?