Recognizing XDG_DESKTOP_DIR in Lubuntu

[Lars Noodén]

The file .config/user-dirs.dirs can be used to configure the location of
the Desktop using the variable XDG_DESKTOP_DIR.  The default is
XDG_DESKTOP_DIR=$HOME/Desktop, but it can be set to almost anything for
example 'XDG_DESKTOP_DIR=$HOME/Foobar'.

However, it cannot be set to '$HOME/' or '$HOME' neither of these set
the Desktop to be the home directory and actually result in an error.
The error is 'The specified directory is not valid'

How can the Desktop be set to $HOME?  If this is a bug, which package
does it apply to?

The question first came up here:
http://ubuntuforums.org/showthread.php?t=2035847

Regards,
/Lars