diff --git a/lib/rubygems/install_update_options.rb b/lib/rubygems/install_update_options.rb
index 15b0860fc9..5c7289426e 100644
--- a/lib/rubygems/install_update_options.rb
+++ b/lib/rubygems/install_update_options.rb
@@ -185,24 +185,9 @@ module Gem::InstallUpdateOptions
   # Default options for the gem install and update commands.
 
   def install_update_options
-    default_options = {
+    {
       :document => %w[ri],
     }
-
-    # If Gem.paths.home exists, but we can't write to it,
-    # fall back to a user installation.
-    if File.exist?(Gem.paths.home) && !File.writable?(Gem.paths.home)
-      default_options[:user_install] = true
-
-      alert_warning "The default GEM_HOME (#{Gem.paths.home}) is not" \
-                    " writable, so rubygems is falling back to installing" \
-                    " under your home folder. To get rid of this warning" \
-                    " permanently either fix your GEM_HOME folder permissions" \
-                    " or add the following to your ~/.gemrc file:\n" \
-                    "    gem: --user-install"
-    end
-
-    default_options
   end
 
   ##
diff --git a/lib/rubygems/path_support.rb b/lib/rubygems/path_support.rb
index b596b4f6b8..310d6a0669 100644
--- a/lib/rubygems/path_support.rb
+++ b/lib/rubygems/path_support.rb
@@ -32,6 +32,19 @@ class Gem::PathSupport
 
     @home = expand(@home)
 
+    # If @home (aka Gem.paths.home) exists, but we can't write to it,
+    # fall back to Gem.user_dir (the directory used for user installs).
+    if File.exist?(@home) && !File.writable?(@home)
+      warn "The default GEM_HOME (#{@home}) is not" \
+            " writable, so rubygems is falling back to installing" \
+            " under your home folder. To get rid of this warning" \
+            " permanently either fix your GEM_HOME folder permissions" \
+            " or add the following to your ~/.gemrc file:\n" \
+            "    gem: --install-dir #{Gem.user_dir}"
+
+      @home = Gem.user_dir
+    end
+
     @path = split_gem_path env["GEM_PATH"], @home
 
     @spec_cache_dir = env["GEM_SPEC_CACHE"] || Gem.default_spec_cache_dir