After changing folders or moving to development site. You will need to update the pear.ini file.

“ERROR: failed to mkdir”

Admin penal fix:

Rename or Delete the old pear.ini
(magento/downloader/pearlib/pear.ini)

Log in to Admin Panel.
Navigate to Magento Connect Manager and log in.
Go to: System -> Extensions -> PEAR Configuration
set: Preferred State from Stable to Beta – Click Save.
Magneto will generate a new pear.ini file now with the correct path. – Revert back to Stable.