IT guy here, if we gave developers the option to exclude whatever the hell they wanted from AV scanning it would just mean that we would end up with computers where the entire C: drive would be excluded.

No, can’t have that.

So what should a decent IT department do to give developers the access they need to do their job while maintaining a decent level of security?

Well, the least bad solution I have worked with was to have a non generic path that was excluded by policy.

Something like C:\Excluded

The directory was excluded from AV scan and allowed in policy, the user could put what they needed there and it would be fine.