I decided to see how inequality between cities has evolved. I used the largest 151 MSAs for which Zillow has rent and income data. Then, assuming that all residents in an MSA have that MSAs median household income, I created an inter-MSA Gini Coefficient. This should create a measure of the income inequality that comes from differing incomes between cities.
I created two measures. One was the Gini coefficient on household income. The second was the Gini coefficient on household income after rent expenses (using MSA income and the Zillow rent affordability index). I compared 1986, 2007, and 2015.
So, measured wage inequality over the past 30 years has been overstated, because those high wages at the upper end of the income distribution mostly serve as a conduit for economic rents to flow to Closed Access rents. (This created a one-time windfall for former property owners, but doesn't really convey any ongoing benefit to new owners.)
On the other hand, as I pointed out in yesterday's post, the ability for the highest income households to use more discretion in their housing consumption means that they are capturing more of those economic rents for themselves.
This becomes complicated very quickly, and when considering this sort of discretionary time-shifting of consumption, I suspect it probably becomes nearly impossible to compare relative real incomes, either over regions or over time.