diff --git a/src/builtin_set.cpp b/src/builtin_set.cpp
index 8672e6fcc..1d1af95a6 100644
--- a/src/builtin_set.cpp
+++ b/src/builtin_set.cpp
@@ -293,6 +293,8 @@ static int my_env_set(const wchar_t *cmd, const wchar_t *key, const wcstring_lis
         if (retval != STATUS_CMD_OK) return retval;
     }
 
+    // We don't check `val->empty()` because an array var with a single empty string will be
+    // "empty". A truly empty array var is set to the special value `ENV_NULL`.
     auto val = list_to_array_val(list);
     retval = env_set(key, val->c_str(), scope | ENV_USER);
     switch (retval) {
diff --git a/src/expand.cpp b/src/expand.cpp
index 2bcc6ec18..4a34ba4a2 100644
--- a/src/expand.cpp
+++ b/src/expand.cpp
@@ -1172,8 +1172,16 @@ static void expand_home_directory(wcstring &input) {
         if (username.empty()) {
             // Current users home directory.
             home = env_get(L"HOME");
+            // If home is either missing or empty,
+            // treat it like an empty list.
+            // $HOME is defined to be a _path_,
+            // and those cannot be empty.
+            //
+            // We do not expand a string-empty var differently,
+            // because that results in bogus paths
+            // - ~/foo turns into /foo.
             if (home.missing_or_empty()) {
-                input.clear();
+                input = ENV_NULL;
                 return;
             }
             tail_idx = 1;