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Hi. Welcome to Just Answer. My name is***** Can you take a picture and post it?
How long has this been like this? Is he licking / scratching at it?
It looks like in the picture that the harness strap may be going over this region. What may be going on is a case of moist dermatitis. Basically that area has been more wet and irritated and it caused this inflammation. When a collar or harness gets wet and then constantly rubs an area, this can happen. A simple thing to do at home would be to get the harness off and then let the area be clean and dry.
That is good that it gets taken off when inside. Some owners will leave them on all the time and that is when they have a better chance of being an issue. I would try to walk him with a collar here for a few days. Keeping that area clean and dry should be a good thing to do.