Why is Homelands considered among the worst Magic expansions?
It helps to look at the whole set in Gatherer and think about what you don't see.


The only counterspell is Memory Lapse (this is actually better now than it was back then -- remember this was competing with Counterspell and Mana Drain).
There are no real card draw spells. There is one looting spell, Forget, and one search spell, Merchant Scroll; all the other "draw a card" cards are cantrips.
The only straight-up removal spell costs 5 (beyond that, you've got the annoyingly-specific artifact-smashing Legends and Serrated Arrows, which is one of the few cards to escape Homelands and actually see competitive play).
The only sweepers are a couple of cards that do 1 damage to everything (e.g. Dry Spell) and Apocalypse Chime.
There's no real burn in the entire set. Direct damage is limited to overcosted pingers and cards like Winter Sky.
There are no mana-ramp cards in the set. Only Renewal, which is an awful Crop Rotation.
There are a lots of cards like Æther Storm and Aysen Highway -- which do practically nothing (one notable exception: An-Zerrin Ruins).
Its flagship cards are Legends-style giant honkin' Legends that are practically unplayable against the competitive decks of its day.


Basically it's a set that's full of rather weak creatures and almost nothing else. Have fun turning Spectral Bears sideways!

Mark Rosewater described Homelands this way:


  It wasn't very innovative. It didn't introduce any strong mechanics.
  It didn't have good synergy. It wasn't particularly elegant. It didn't
  have many of the qualities that we now judge a set's design by. (To be
  fair, the set was very flavorful, so it wasn't without any design
  merit.)


This reputation was further cemented when Wizards tried to "fix" Homelands' unpopularity by adding stupid rules forcing you to use Homelands cards to the first Pro Tour.



What I find surprising isn't so much that Homelands had all these problems but that the original Magic set (Alpha/Beta/Unlimited) largely didn't. Most of the design space of modern-day Magic can be traced directly to about 300 cards in ABU: direct damage, removal, countermagic, bounce, fast mana, mana ramp, card draw, card filtering, tutors, sweepers, tokens, reanimation, X-spells, even morph.

Now, Homelands was never really meant for stand-alone play; note the inclusion of Leeches, for instance, without any in-set poison cards. As a 1995 Duelist article explained:


  Legends also sparked a few key card ideas; in response to 
  Serpent Generator and Pit Scorpion, for example, 
  Scott and Kyle added an anti-poison card to the set — one of 
  what would turn out to be a series of cards meant to help 
  counteract various deck strategies.


But, even if you use the core set or previous expansions will make up for them, I think the gaps in the set are still noteworthy as reflections of the designers' general unpreparedness and confusion: Why are there no real burn or removal in Homelands? Because the designers just couldn't seem to get their heads around the role of those things in a game of Magic. Instead you've got way too many narrow cards that try to answer strategies that were mostly too weak to need "answers" anyway.

Overall, it has the feel of someone taking their "kitchen table" dynamic and turning it into a set. I think that's a reflection of the set being designed by folks who weren't really plugged into the ways Magic had developed as a strategic game.