We study the generation of spin squeezing in arrays of long-lived dipoles subject to collective emission, coherent drive, elastic interactions, and single-particle relaxation. It is found that not only does single-particle relaxation not necessarily degrade the squeezing generated in the collective dynamics, but the interplay of single-particle and collective effects can in fact facilitate the generation of squeezing in a specific parameter regime. This latter behavior is connected to the dynamical self-tuning of the system through a dissipative phase transition that is present in the collective system alone. Our findings will be applicable to next-generation quantum sensors with an eye towards atomic clocks in cavity-QED setups and trapped ion systems.