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You asked, Why does Jerusalem have to be its capital?

Jerusalem

A crucial city in the Old and New Testaments, Jerusalem served as the seat of both Israel’s kingly authority and priestly rites. It was the capital of Israel during David and Solomon’s kingdom and was the capital of Judah’s kingdom after Judah and Israel’s split. It housed the Jewish temple where the nation offered sacrifices and was the setting of Jesus’ trial, crucifixion, and resurrection. It also served as headquarters and missionary sending base for the early church. Jerusalem is located between the Mediterranean and the northern end of the Dead Sea on a high plateau surrounded by mountains, hence why many biblical travel accounts refer going “up” to Jerusalem (Psalm 125:2). “Zion,” the hilltop where King David built his palace, is often used as a synonym for Jerusalem, which in turn is often used as a reference for God’s people (2 Sam. 5:7,9; Ps. 147:12).

Before Israel’s entry into Canaan, scripture predicted that God would appoint a place in Israel where he would “cause his name to dwell” (Deut. 12:11) and later affirms that Jerusalem had become this chosen place (1 Kings 11:36). Jerusalem was originally established by a Canaanite people called the Jebusites (Josh. 15:8, 63). The first explicit reference to the city in the Bible is in the accounts of Joshua’s campaign to conquer Canaan and describes that its King, Adoni-Zekek, was killed by Joshua along with four other local kings (Josh. 10:1, 26). However the city may be mentioned even earlier, since the mysterious priest-king Melchizedek who visited Abraham in Genesis 14 is described as the king of Salem (“peace”), which may be an early name for Jerusalem (“foundation of peace”) (Gen. 14:18; cf. Hebrews 7).

Jerusalem was allotted to the tribe of Benjamin (Josh. 18:28). The Israelites took over the city in the time of the judges but did not eliminate the Jebusites (Judg. 1:8, 21; 19:11-12). David finally drove out the Jebusites from the city and built his palace on the Jebusite hilltop fortress called Zion, which he also christened “the city of David” (2 Sam. 5:9, 11). David was made King of Israel and established Jerusalem as the center of his kingdom (2 Sam. 5:9-12). At one point during David’s reign an angel almost destroyed Jerusalem because of an illegal census but was commanded by God to stop (2 Sam. 24:16). David’s son Solomon built up the city considerably, his greatest contribution being the construction of its temple (1 Kings 3:1). At the end of Solomon’s reign the country was racked by civil war and split into two separate kingdoms: the tribes of Judah and Benjamin in the south kept Jerusalem as their capital while the remaining northern tribes were ruled by a different king in Samaria. Jerusalem was threatened by Assyria during King Hezekiah’s reign (2 Kings 18:17) but remained unharmed until Babylon’s King Nebuchadnezzar laid siege to Jerusalem, captured the city, sent its inhabitants into exile in Babylon, and set fire to its houses, palace, and – worst of all –temple (2 Kings 24:10,14; 25:9). After seven decades in a foreign land, the Jewish people were allowed to return home to rebuild their temple under the Persian King Cyrus (Ezra 1:2-3), despite local opposition (Ezra 6:14). The books of Ezra and Nehemiah record the Jewish people’s rebuilding efforts and Nehemiah mentions many of Jerusalem’s gates and city structures.

As the "dwelling place" of God (Ps 76:2), the city of Jerusalem also maintains an important role in the Bible’s non-historic literature. Psalms 120 through 134, known as the Psalm of Ascents, were written for Jews on their way to Jerusalem for festival celebrations. The writings of Ecclesiastes are set in Jerusalem (Eccles. 1:1, 12) and Song of Songs is also presumably set in the city (Song of Songs 2:7; 3:2). The entire book of Lamentations is a mournful account of Jerusalem’s destruction at the hands of the Babylonians. The Old Testament prophets form a unified voice in their prophecies concerning Jerusalem and Isaiah in particular has much to say about the city, occasionally calling it “Ariel” (Isa. 29:1, 2, 7). The prophets consistently predict Jerusalem’s destruction at the hand of the Babylonians because of its unfaithfulness to God, but they also anticipate its restoration by God as the city where he would establish his kingdom and forever enjoy his people (Micah 4:10; Zeph. 3:14-17).

After the Babylonian exile, Jerusalem changed hands between different political authorities until the Roman Empire set it under the rule of a Jewish client-King. At Jesus’ birth, Jerusalem was the seat of King Herod, who was visited by the Magi on their way to find Jesus (Matt. 2:1-2). The temple of Jerusalem is where Joseph and Mary took Jesus to be purified after his birth and blessed by the prophets Simeon and Anna (Luke 2:22, 25-38), where Jesus was found at age 12 dialoguing with religious teachers (Luke 2:43), where the devil took Jesus to the rooftop for his third temptation (Luke 4:9), and where Jesus disrupted money sellers in the outer courts (Mark 11:15). The city of Jerusalem is also where Jesus was welcomed like royalty before being put on trial by Israel’s religious leaders and crucified by Rome’s political ones (Luke 19:28-38). In his teachings, Jesus predicted future unrest in the city and anticipated its destruction in AD 70 (Luke 21:24). Though Jerusalem was hailed in his time as the only place of true worship, He also predicted that God’s worship would not be confined by location (John 4:21). Nevertheless, Jesus expressed a nostalgic affection for the city before his death at the hands of its citizens (Matt. 23:37).

After Christ’s resurrection, the disciples were instructed to remain in Jerusalem until they received the Holy Spirit (Acts 1:4). Peter gave the first evangelistic sermon in Jerusalem and the church began to grow (Acts 2:14, 6:7), despite persecution from the likes of Paul (Acts 8:1-3). Jerusalem acted as a base for the church where the apostles, elders, and other church officials resided (Acts 15:2). The first church council met in Jerusalem to determine the pivotal question of Gentile converts. They decided that Gentile believers could be Christ-followers without following Jewish legalistic regulations (Acts 15:1-29). Paul was later arrested in Jerusalem before his shipment to Rome for further trial (Acts 21:27; 25:12). In Revelation the new city of Jerusalem is portrayed as a God’s bride, a metaphor for God’s people (Rev. 21:2). The same city, then, which served as the center of Israel’s kingship and sacrificial system is the same city where the incarnate God revealed himself as humanity’s true king and true sacrifice, and which symbolizes God’s restored relationship with his people.

Source: Olive Tree Places of the Bible