Approximately two billion people — a quarter of the earth's population — directly harvest forest products to meet their daily needs. These individuals disproportionately experience the impacts of increasing climatic variability and global biodiversity loss, and must disproportionately alter their behaviors in response to these impacts. Much of the increasingly ambitious global conservation agenda relies on voluntary uptake of conservation behaviors in such populations. Thus, it is critical to understand how individuals in these communities perceive environmental change and use conservation practices as a tool to protect their well-being. To date however, there have been no quantitative studies of how individual perceptions of forest change and its causes shape real-world conservation behaviors in forest dependent populations. Here we use a novel participatory mapping activity to elicit spatially explicit perceptions of forest change and its drivers across 43 mangrove-dependent communities in Pemba, Tanzania. We show that perceptions of mangrove decline drive individuals to propose stricter limits on fuelwood harvests from community forests only if they believe that the resultant gains in mangrove cover will not be stolen by outsiders. Conversely, individuals who believe their community mangrove forests are at high risk of theft actually decrease their support for forest conservation in response to perceived forest decline. High rates of inter-group competition and mangrove loss are thus driving a 'race to the bottom' phenomenon in community forests in this system. This finding demonstrates a mechanism by which increasing environmental decline may cause communities to forgo conservation practices, rather than adopt them, as is often assumed in much community-based conservation planning. However, we also show that when effective boundaries are present, individuals are willing to limit their own harvests to stem such perceived decline.