While translating 地縛 (jibaku) literally means "earthbound" (land + bind), the 地縛 in the official Japanese title 地縛少年花子くん refers to 地縛霊 (jibakurei), which means "ghost bound to a specific physical location (usu. where death occurred)".
The definition of 地縛霊 from Daijisen (a general-purpose Japanese dictionary) used by Japanese Wikipedia is
A ghost whose exists on a place (e.g. a land, building, etc.) at the time of their death and cannot wander off from there because they do not accept their death or understand why they died.
As an aside, the English term is "residual haunting" or Stone Tape.
The Japanese title replaced the kanji 霊 (ghost) to 少年 (boy). Thus, the literal translation of it is "Hanako-kun, the boy who is bound (to a certain place)". It actually does not refer to any place at all.
Regarding the official English localization by Yen Press, this is just a guess, but they possibly chose "toilet-bound" due to the origin of the tale and the character's in-universe background. Regarding if "bound" is correct or not (in refer to the anime), the official Japanese title refers to "bound" though.
*地縛 can also be read as jishibari, though it is unrelated to "earthbound" at all. On the other hand, the Japanese never uses 地縛 for "earthbound".