Despite multiple approaches over the last several decades to harmonize conservation and development goals in the tropics, forest-dependent households remain the poorest in the world. Durable housing and alternatives to fuelwood for cooking are critical needs to reduce multi-dimensional poverty. These improvements also potentially reduce pressure on forests and alleviate forest degradation. We test this possibility in dry tropical forests of the Central Indian Highlands where tribal and other marginalized populations rely on forests for energy, construction materials, and other livelihood needs. Based on a remotely sensed measure of forest degradation and a 5000 household survey of forest use, we use machine learning (causal forests) and other statistical methods to quantify treatment effects of two improved living standards—alternatives to fuelwood for cooking and non-forest-based housing material—on forest degradation in 1, 2, and 5 km buffers around 500 villages. Both improved living standards had significant treatment effects (−0.030 ± 0.078, −0.030 ± 0.023, 95% CI), respectively, with negative values indicating less forest degradation, within 1 km buffers around villages. Treatment effects were lower with increasing distance from villages. Results suggest that improved living standards can both reduce forest degradation and alleviate poverty. Forest restoration efforts can target improved living standards for local communities without conflicts over land tenure or taking land out of production to plant trees.