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Is it the host's amount of controlled territory? Will joining another player who has controlled a lot of territory also affect my hourly income?

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Hourly income is tracked separately for each character based on what that character has accomplished; it's the same as if you were in a single-player game.

If you have completed an activity that gives hourly income, gained territory that gives hourly income, or purchased buildings/stores that give hourly income then you will receive that income regardless of whether your partner has done it. If your partner has completed/purchased something and gains hourly income from it, but you haven't completed/purchased it, you will not receive income for it.

Note that buildings, drug/cash stashes, sex toys, activities, etc. are all separately tracked by each client; if A has bought a given building and B has not, in a co-op game A will see the building as purchased while B will not, and B can still go purchase it. Likewise if A & B go complete an activity that B has done before but A has not, B will get the rewards for repeating it while A will get the rewards for doing it the first time.

There is one exception to this: strongholds. Only the host of a co-op game can upgrade strongholds; as with other income-boosters, doing so only benefits the host and not the other player. The other player will need to host occasionally, or load their character in single-player, in order to upgrade acquired strongholds.

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The hourly income is dependent on what buildings/shops you've purchased, and this is tracked separately per-person in a co-op game. If your partner owns a shop but you do not, you can buy it as well, but it won't count as being "yours" until you've done so.

Therefore, your hourly income is tracked and reported separately.

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In that other answer, it is mentioned that "activities and other side missions count for both people if finished in co-op". Does this mean that if an activity that will allow you to take control of a territory is finished in co-op, this will increase the hourly city income for both co-op players? –  galacticninja Apr 4 '13 at 16:36
    
@galacticninja, yes, if you take control of a region via destroying a gang operation together, then doing it together unlocks it for both. –  agent86 Apr 4 '13 at 16:44
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