path_expand cannot find ${USERNAME}

[ajinkya-k]

When I use path_expand_r("~/") the output I get is:

C:/Users/${USERNAME}

eventhough Sys.getenv("USERNAME") returns the correct value. Even Sys.getenv("R_USER") and Sys.getenv("HOME") have the user directory set correctly.
This causes issues downstream in renv and also usethis::edit_r_profile(). For example, here's the output from a call to the latter:

> usethis::edit_r_profile()
Error: [EPERM] Failed to make directory 'C:/Users/${USERNAME}': operation not permitted

I tried to chase down where this happens and it seems to me that the issue might be in .Call(fs_expand_, path, FALSE). Any idea how to fix this? Am I missing an environment variable?