I think the notion is that, since God created the world, he was the original owner of it. So, unless you can show an original land deed in which God, as the owner, transferred ownership to a human, who ultimately transferred it to you, your claim on the land is illegitimate. That you (or the original homesteader) took the unimproved land and made it better or more useful for humans would not create any rights under this system.
Now, let's think about that for a moment: If we cannot own land, regardless of how we improve it, because we didn't create the base materials in the first place, then how can we ever own anything?
A woodworker cuts down a tree, saws it into boards, cuts and shapes those boards to make a chair. Does he own that chair? Well of course not, he didn't own the tree to start with! The tree was created by God, and the woodworker cannot show any transfer of ownership of the tree. Thus, any claim he make to ownership of the chair is based on fraud and theft of the tree.
And you can extend this to any material object, no matter how complicated.
Thus, if we can't own land, we can't own anything.