I hate to say it but your cat REALLY needs to be seen by a Vet. This just isn't something that you can deal with yourself. Plus, if "whatever is causing this" gets worse, it could cost you even more in the long run. That area looks so very raw and because of where it's located, close to his butt-hole area, and him using a litterbox.....puts him at more risk for infection there.
You really need to determine what's caused this.
The fact that you've seen him licking down there, he'll just continue to do this.
Here's a link (I'm sure there's many out there, just do a search on Google and in the search box type "how to check cat for fleas") that gives a bit of info on how to check cat for fleas. You should buy a flea comb, or if you have one of your own that has very very fine "teeth" on it, comb your cat good. Check the teeth of the comb in between swipes. You can either see the fleas or you'll see little tiny flecks of black ("flea dirt"). If your cat does have fleas, you're going to have to go to the Vet and get a proper treatment for it. You simply cannot use the dangerous, toxic crap they sell in stores (eg: crap by Hartz, etc). It is totally poison and has killed many cats, why they still sell it, I don't know. There are class action lawsuits against the makers of much of this stuff). There's products like Frontline and Revolution.
http://www.ehow.com/how_2191609_chec...festation.html
A severe flea infestation in a cat can lead to anemia..........and often if a cat has fleas, they have taperworms, too. (they develop tapeworm from ingesting the flea eggs). Read up on Fleas in cats.
You cat needs to really have a good thorough vet check because this could be caused by something other than fleas; some type of pain or irritation to the area down there that's causing him to keep licking. #1 cause in male cats to lick down there a lot is a bladder infection (urinary tract infection) or crystals in the urine that can get clogged in their urethra (the little hole that urine comes out of)......if left undiagnosed/untreated, can be truly life-threatening. A Vet can take a urine sample and test urine for signs of an infection, or crystals. Very simple test.
If money is tight, look into Care Credit. Many, many folks use this to help pay for Vet costs. Here's a link with information on it. I think how it works is, they basically loan you the money and depending on the repayment plan you choose, if you pay it back over a certain period of time (?3 months), you don't pay any interest. Most Vet clinics except it. Read up on it, or if you have questions about, start a post and ask folks here. Here's the link:
http://www.carecredit.com/vetmed/
Please find a way to have your cat seen by a Vet tomorrow. If you have a Humane Society where you live, call and see if you can see one of their Vets, explain that money is tight and ask what they'd charge.