OP - this animal seems to be in distress. Regardless of the cause. In general, I would prefer that an animal be humanely euthanized rather than allow it to suffer. Animals outside are at risk of starvation, disease, and injury, any of which can be fatal and will cause suffering. I would take the animal, and any others left outside that are in distress to the shelter. Even if it means that they'll be euthanized. Ideal? No. But it prevents suffering.
Thank you Sibley,
I agree with your assessment that the animal is in distress. Did some research and the hot spots can be a reaction to flea bites or stress. The poor guy likely has both going on. DH isn't on board with removal to the shelter, so for now I'm going to do what I can to relieve his stress...food and water and affection for now.
I'm going to approach the wife next door about his condition again and see if I can't get anywhere with her.