I'm not sure why some people have a hard time wrapping their heads around this, but there is always a cost to living in a dwelling. Someone will pay for it, and if you don't want to sleep under a bridge, you're the one paying for it. If you don't own a home, you pay someone else rent. If you do own a home, you've got a giant capital expense. Your lack of paying someone else rent is your imputed rent, which is the return on your capital and is every bit as much a real form of income as getting a check every month (even if it's not taxed).
Not understanding this leads people to make crazy conclusions, such as the weird meme that owning a home isn't an actual investment, when in fact drawing rents off of it definitely makes it an investment, possibly a great or a terrible one, but an investment nonetheless. Real estate draws income; you either choose to extract it from someone else or consume it yourself.
And yes, MMM's budget should realistically reflect his imputed rent, because his capital costs are very high. He could always divest his house and invest the money elsewhere...in which case he'd make a bunch more income but would have to pay rent. Assuming it's a wash, his budget would reflect a lot more spending, even though his financial situation would be identical. Which is another way of saying that he's currently spending a lot on rent which he doesn't account for, because he earns it all back on his very large investment in housing.