There are a variety of reasons not to develop on a shared database. As others have already mentioned, when you are developing locally you can avoid all sorts of collisions between developers. If you are using MS database projects to do your development, you have a complete copy of your schema under source control and can check out objects and isolate your code changes. It also means that your code does not need to compile when you save an instance of it, which is helpful if you need to shelve your current work. In addition you get static code review and much better ability to handle refactoring your database.

The key factor is unit testing. To conduct efficient testing, you should be able to scrap the data, autogenerate more, rename and recreate objects. Database projects allow you to incorporate database unit tests within the same solution so that you can have a tightly integrated base of code.

Database projects allow for an easy way to version up or version down any schema. Your team can choose the best way to go about this, but I think more importantly, the implementation of schema should be a separate thing from the definition of that schema. It allows for a much more Agile development environment in which are can be constantly at the ready to implement your code changes.