Error with config when upgrading from 0.6.34 to 0.7.59 (the "alias" directive must use captures inside location given by regular expression)

[Jools Wills]

I got an error

the "alias" directive must use captures inside location given by regular
expression in /etc/nginx/sites-enabled/default:70

Quite a confusing message for me. The line in question.

alias /home/$homedir/public_html/;

which comes from

# For requests starting with a tilde, break them into three components:
# 1. The username, everything after the tilde up to the first slash
# 2. The file location, everything after the username up to the last
slash
# 3. The trailing slash(es)
# Then, rewrite to go to the f~/ branch.
location /~ {
    if ($request_uri ~ ^/~([^/]*)(/.*[^/]|)(/*)$) {
        set $homedir $1;
        set $filedir $2;
        set $trailingslashes $3;
        rewrite ^/~([^/]*)(/|$)(.*)$ f~/$3;
    }
}

# Here, the user-directory components have been parsed. Use an alias to
set
# the file directory prefix. But if the file at the requested URI is a
# directory, we jump to the ~/ branch for additional processing.
location f~/ {
    alias /home/$homedir/public_html/;
    if (-d /home/$homedir/public_html$filedir) {
        rewrite ^f~/(.*) ~/$1;
    }
}

# Here, the request is for a directory in a user's home directory. We
check
# that the request URI contained trailing slashes. If it did not, then
we
# add the slashes and send a redirect. This circumvents Nginx's faulty
# internal slash-adding mechanism.
location ~/ {
    autoindex on;
    alias /home/$homedir/public_html/;
    if ($trailingslashes = "") {
        rewrite .* /~$homedir$filedir/ redirect;
    }
}

(this code comes from this blog http://blog.sbf5.com/?p=6)

Any ideas what this new error means. Seems related to a "new" feature
added in 0.7.40.

Best Regards

Jools