Why do Premillennialists teach the 1,000 year reign of Christ will take place on Earth?

The holy city only comes after the 2nd resurrection. At this stage there are no fleshly humans left - hence the new earth.

After the 1st Resurrection the saints raised and transformed will reign on earth over the remnant of humanity and preparing the earth for the 2nd resurrection where all the dead will be made alive again and face the 'judgement' - not the condemnation! They will have opportunity, for the first time, to know the truth about God and Jesus without the deception of evil present too.

The rest of the dead did not come to life until the thousand years were ended.

When evil is present, free-will does not exist - one cannot have free-will if they are deceived. Therefore they have not made a rational, free-will choice FOR Jesus while their minds were corrupted - only God can and will remove that corruption/deception at the time of His choosing for all men. This is not universalism, but fair and just opportunity for salvation understanding and acceptance for all. It is not a 2nd chance for salvation, but rather a 2nd chance at life.

2 Pet 3:9 The Lord is not slow in keeping his promise... not wanting anyone to perish, but everyone to come to repentance.

1 Tim 2:4 who desires all men to be saved and to come to the knowledge of the truth.

When Christ returns to meet the raised/transformed saints (kings and priests) are with surviving humanity to guide, love and teach, we are not told we go to heaven at any time. The word 'heavenly' denotes a state not a place.

Rev 1:6-7 Blessed and holy is the one who has a part in the first resurrection; over these the second death has no power, but they will be priests of God and of Christ and will reign with Him for a thousand years. When the thousand years are completed, Satan will be released from his prison, and will come out to deceive the nations which are in the four corners of the earth.

After the wars at the end of this age, the earth needs repairing and governing in righteousness. After this, the rest are raised to judgement - they are still fleshly and able to die so they must be on earth. There is no need to govern remotely, the saints are with them on the earth leading by example.

The 1000 year reign cannot be in heaven as the preparations are to make the earth ready for the 2nd resurrection people. They are reigning over the rest of humanity not part of Christ/church/144,000(?) when he returns.

There is no mention of Millennial Reign taking place on earth.

Not true. When Christ returns, the tribulation will end and he will become King of Kings, here on Earth:

Blessed are the meek, For they shall inherit the earth. — Matthew 5:5

And have made us kings and priests to our God; And we shall reign on the earth.” — Revelation 5:10

The kingdoms of this world have become the kingdoms of our Lord and of His Christ, and He shall reign forever and ever! — Revelation 11:15

The Old Testament contains many prophecies about the world to come, and it clearly takes place here on Earth.

At first many nations will refuse Christ's rule, but soon they will all come to accept it and cooperate with each other during the Millennium:

And it shall come to pass that everyone who is left of all the nations which came against Jerusalem shall go up from year to year to worship the King, the LORD of hosts, and to keep the Feast of Tabernacles. And it shall be that whichever of the families of the earth do not come up to Jerusalem to worship the King, the LORD of hosts, on them there will be no rain. — Zechariah 14:16–17

He shall judge between the nations, And rebuke many people; They shall beat their swords into plowshares, And their spears into pruning hooks; Nation shall not lift up sword against nation, Neither shall they learn war anymore. — Isaiah 2:4

The wolf also shall dwell with the lamb, The leopard shall lie down with the young goat, The calf and the young lion and the fatling together; And a little child shall lead them. — Isaiah 11:6

In that day there will be a highway from Egypt to Assyria, and the Assyrian will come into Egypt and the Egyptian into Assyria, and the Egyptians will serve with the Assyrians. — Isaiah 19:23

Would there be any need for plowing and pruning, or highways and rain, in Heaven? Will there be wolves and leopards and lions? and children?

Where would the Millennial Reign be on earth if the Holy City has not landed on earth until Revelation 21.

The Millennial Reign will be over the entire earth (it's not clear why you would think otherwise).

Your question asks WHY premillennialists teach the 1,000 year reign of Christ will take place on Earth and what the basis is for their beliefs. My answer is not an attempt to justify this view but is simply the result of my research into this subject. There are two groups of premillennialists – historic and dispensational. My answer deals only with dispensational premillennialism.

Dispensational premillennialists hold that after the second coming of Christ to Earth, there to rule from Jerusalem, the nation of Israel will be saved and restored to a place of pre-eminence in the millennium. Israel will have a special function of service in the millennium that is different from that of the Church. Key to this view is that Israel and the Church are distinct and that “All Israel will be saved” (Romans 11:26). https://www.gotquestions.org/all-Israel-saved.html

The short answer is that dispensational premillennialists adopt a literal interpretation of Revelation 20:2-7 where the millennial kingdom is said to be 1,000 years long. The number is mentioned six times. They also take Jesus’ words in Luke 1:32-33 to mean Jesus will return to earth to rule from Jerusalem:

He will be great and will be called the Son of the Most High. And the Lord God will give to him the throne of his father David, and he will reign over the house of Jacob forever, and of his kingdom there will be no end.

Another reason why they believe Jesus must return to Earth to rule from Jerusalem is that God’s unconditional covenants with Abraham and David have not been fully or permanently fulfilled. They believe God will fulfil His Old Testament promises made to ethnic Israel, after this modern “Church Age” in which we live today is concluded. Here is an extract from an article on this topic:

The Abrahamic Covenant promised Israel a land, a posterity and ruler, and a spiritual blessing (Genesis 12:1–3). The Palestinian Covenant promised Israel a restoration to the land and occupation of the land (Deuteronomy 30:1–10). The Davidic Covenant promised Israel a king from David’s line who would rule forever—giving the nation rest from all their enemies (2 Samuel 7:10–13).

At the second coming, these covenants will be fulfilled as Israel is re-gathered from the nations (Matthew 24:31), converted (Zechariah 12:10–14), and restored to the land under the rule of the Messiah, Jesus Christ. The Bible speaks of the conditions during the millennium as a perfect environment physically and spiritually. It will be a time of peace (Micah 4:2–4; Isaiah 32:17–18), joy (Isaiah 61:7, 10), and comfort (Isaiah 40:1–2). The Bible also tells us that only believers will enter the millennial kingdom. Because of this, it will be a time of obedience (Jeremiah 31:33), holiness (Isaiah 35:8), truth (Isaiah 65:16), and the knowledge of God (Isaiah 11:9, Habakkuk 2:14). Christ will rule as king (Isaiah 9:3–7; 11:1–10). Nobles and governors will also rule (Isaiah 32:1; Matthew 19:28), and Jerusalem will be the political center of the world (Zechariah 8:3). Source: https://www.gotquestions.org/millennium.html

To sum up, this particular dispensational premillennialist view believes in a literal return to earth of Christ Jesus and the main purpose of Jesus’ 1,000-year reign is to fulfil the prophecies given to Israel. God’s voluntary and one-sided covenants will result in Israel being blessed and in the restoration of the world. After the thousand year reign of Christ Jesus comes the “eternal state” when God creates a new heaven and a new earth, and the New Jerusalem descends from God to the new earth (Revelation 21:1-2).

There may be other interpretations on premillennialism and I hope I have not misrepresented this one. However, I must stress that this is not my personal view. I am simply trying to answer your question on WHY they believe in a literal 1,000 year reign on Christ on Earth.

"Why do Premillennialists teach the 1,000 year reign of Christ will take place on Earth?" The short answer is because the Bible explicitly says so - and most premillennialists tend to also believe 2 Timothy 3:16-17 "All Scripture is God-breathed and is useful for instruction, for conviction, for correction, and for training in righteousness, 17so that the man of God may be complete, fully equipped for every good work." There are several factors that all work together to give the answer.

1. First, we have to remember that the original books of the Bible did not have chapter and verse divisions. Those were added centuries later as a convenience. The point there is that the passage in Rev 21 is the same passage and same context as Rev 20 - the Millennial reign of Christ. The ones who deny it do so on the flimsy argument that Revelation is apocalyptic, and therefore is symbolic or metaphor and cannot be taken literally.

2. But the most important point is that we are told to study scripture so that we can always be prepared to give a reason for the hope we have - this is apologetics, the biblical defense of our faith.
   One of the most basic principles of Bible Interpretation is that we always compare scripture with other passages. Scripture interprets scripture. There are other verses that also confirm that Christ will return literally, to earth and reign here. Zechariah foretold of Christ's first advent as a literal event and his second advent as a literal event.
   "In Zechariah, Christ is portrayed in his two advents- as boh Servant and King, Man and God." In chapter 12, he writes of the spiritual salvation of Israel, but also the literal, physical salvation of Israel. Then, the climax is in chapter 14, where he writes about the second coming of the Messiah, and the Kingdom of the Messiah.
   More than 400 years before Christ is even born, Zechariah tells the exact city and the exact Mountain- where Christ will return at the end of the age. 9And the LORD will be king over all the earth; in that day the LORD will be the only one, and His name the only one.

   Zechariah 14:9-11 9 And the LORD will be king over all the earth; in that day the LORD will be the only one, and His name the only one. 10 All the land will be changed into a plain from Geba to Rimmon south of Jerusalem; but Jerusalem will rise and remain on its site from Benjamin’s Gate as far as the place of the First Gate to the Corner Gate, and from the Tower of Hananel to the king’s wine presses. 11 People will live in it, and there will no longer be a curse, for Jerusalem will dwell in security."

https://reviveisrael.org/archive/language/english/2007/mount_olives.htm

Lastly, when we compare scripture with other scripture, we see amazing harmony and confirmation. Acts is neither poetry, nor prophetic genre, but the literal history and acts of the disciples and the birth of the early church. Here we see Christ literally go up to Heaven, visibly and physically, in a cloud, from the Mount of Olives. This location was very significant, and Christ knew the words of Zechariah.
Acts 1:10-11 The Ascension " 10 They were looking intently into the sky as He was going, when suddenly two men dressed in white stood beside them. 11“Men of Galilee,” they said, “why do you stand here looking into the sky? This same Jesus, who has been taken from you into heaven, will come back in the same way you have seen Him go into heaven.”

The disciples saw Christ literally ascend into a cloud from the Mt of Olives and he will return, visably, physically in a cloud on the Mr of Olives, and the angel confirmed this to all those present.
Those who say that his return is not literal - have no basis to believe that his ascension to heaven was literal. "If the text seems to make literal sense, seek no other sense, or it will become nonsense"