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It's short for council estate. We also have the same connotation if you own an estate, a large parcel of land with a big house or whatever.
I think your "council estate" is our "section 08," govt provided shitty housing projects?
Funnily enough the council-built housing in the UK is generally of a very high structural and architectural quality. I am currently sitting in a 100+ years old council property that is still eminently habitable. Only four houses of the 125 that were built here have been demolished. All others are currently inhabited. It all began at the end of WW1:
https://en.m.wikipedia.org/wiki/Tudor_Walters_Report
Well shit, nevermind!
I know. It’s weird just how good the UK’s social housing was. There was a great belief that the housing estates you built had a direct effect on the people who lived there. Compare that with some of the US’s efforts - that demolished place in St. Louis, O’block in Chicago etc. Different worlds. Eventually the UK government switched to inner city high rises (“streets in the sky”) and social results were… mixed, to say the least. Throw a lot of poor, disenfranchised, non native, non related people in a closed building and, shock horror, negative results were had. Colour me surprised.