How to measure close distance between two iphone devices using bluetooth?

There have been no significant changes in the past 5 years. I wrote a blog post with a deep dive into the current state as of 2020. Mobile phones in 2020 have newer bluetooth chipsets than in 2015, and may support Bluetooth 5, but there are no significant new capabilities that improve the reliability distance estimates. Indeed, there are no new proximity sensors on iOS and Android phones (other than NFC, which only measures proximity of a few centimeters away), so it is inappropriate for this use case. What's more, 5 years has made things worse by adding fragmentation, especially on the iOS side. Back in 2015, there were only a few Apple handset variants in common circulation. Now there are over a dozen.

To recap the current state of affairs that is mostly unchanged: you can use one phone to transmit over BLE and another to measure the signal strength and estimate distance. For known transmitters and approximately line of sight conditions (e.g. phones are not in a pocket or purse) measuring whether two phones are 5 meters apart is possible with perhaps a 60 percent confidence interval. Where this falls apart is with three important variables:

1. Phones and especially Android phones are quite fragmented. Transmitter power and receiver sensitivity are quite unpredictable between models and have a large variance. Apple has much less variance between models, but you still see differences that noticeably affect results.
2. People often put phones in a case, a purse or a pocket. This throws things off considerably further.
3. When clear line of sight conditions are not present, results are unreliable as you have said.

Bluetooth 5.1 does offer Angle of Arrival and other features that may improve this, but as of October 2020, neither Android 11 nor iOS 14 support any of these features, making the features unusable with almost any mobile phone.