How long ago did you take the dog from the pound? If more than 3-4 weeks ignore the next paragraph.
This looks like one of my dogs had when he was in kennels for a couple of months. It sorted itself when he was no longer sleeping on cold concrete floors.
You could try rubbing it with alcohol. One of mine has minor skin problems and has large bald patches at times, but I rub them with rakia (bulgarian brandy) and they always clear up. I have to cadge the rakia from a neighbor because I don't drink spirits and refuse to buy a bottle just for the tiny bit I need. It can't do any harm to try anyway.
It is hard to tell (for me) what we are looking at. Is the fur discolouring from licking too much or is it perhaps blood? Have you been able to part the hair and look at the skin in that area, what do you see? A timeline would help too, how long has it been going on? Have you taken the dog to the vet yet after adopting him from the shelter?
The reasons why a dog might itch a spot could be many, but if it is so severe that there is presence of blood I would let the vet have a look to get it properly diagnosed and treated.