I can see both sides of the argument here. For 40 odd years of my life, I never had a dog, and was always terrified of them. Idk, maybe one lurched at me when I was a kid? I'd always give dogs a very, very wide berth when walking past them, I'd never attempt to pet them in social situations, and yes, I hate the smells that dogs make. In terms of the fear, I totally get it. I wouldn't call it crippling but it was a very real fear. Like you, I probably would have been afraid of being launched at by a dog if it lived in my building.
At this point I should probably mention that I'm almost certainly on the spectrum, and fears and noise sensitivity are probably accentuated above the level of your average joe.
Then, I had to live with my uncle for 18 months who had a Jack Russell and some other kind of annoying, adorable, small and hyperactive dog. These dogs seemed not to care that I was afraid of them and they absolutely barged their way into my life, into my bedroom, bed (they wouldn't be told) and, eventually, my heart.
I'm now no longer afraid of dogs. In fact, I actively like them and enjoy their company. They're very loving, loyal companions who provide a lot of pleasure for their owners and are very, very good for people's mental health.
However, they still stink. Irresponsible owners still don't clean up shit. Some have never been trained and may yap at the smallest thing going past the window; a person, a leaf, a car. Some may do that ALL DAY LONG.
What I would say from having read your responses is that you seem to have had your fear and dislike instilled in you from your sister's experiences instead of your own.
If this dog owning person is friendly enough, perhaps you should approach them when you next see them, and (assuming the dog isn't behaving aggressively) tell the owner 'I'm a bit nervous about dogs but would you mind introducing me/showing me how to say hello to him/her please?'
You may have a change of heart. You may fall in love with the little fella.
That way, even if it stinks up the sofas and occasionally barks, because you now like the dog and enjoy seeing it from time to time, the positives might start to outweigh the negatives. Or, at least make them feel less overbearing in your life.