The new election will be held on November 29.
Spain must decide whether it wants to join the declining far-right wave or continue to be an outpost of social justice, Sánchez said in a televised speech on Monday morning.
Sánchez admits that the government "made mistakes" and justifies his decision by saying that, in order to do more, it must "renew and broaden the support of the people", El País reports.
Anger after eviction
The housing package, which essentially consisted of two separate laws, was put to a vote on Friday after an 87-year-old woman was evicted from her apartment in Madrid - an incident that brought Spaniards' anger over the housing crisis to a climax.
The proposals aimed to stop evictions of vulnerable people by 2030, make property speculation more difficult, further restrict short-term rentals and ensure that rental contracts are automatically extended.
They were voted down in parliament after the Catalan separatist party Junts, whose votes the government needs for a majority, joined the three right-wing opposition parties, including the far-right Vox.
Missing the core of the problem
Opponents believe that the government's proposal does not address the core of the problem and could instead worsen the housing crisis.
Low wages and high house prices and rents have combined to make it increasingly difficult for many Spaniards to find a place to live. Anger has often been directed at lucrative short-term rentals, which have driven up prices in tourist resorts and cities. At the same time, there are large numbers of empty homes in rural areas where jobs are scarce, as well as empty ghost complexes in many tourist resorts.
