Final answer:
Municipalities benefit from gentrification through higher tax revenues and improved infrastructure as property values increase, enhancing the local tax base and funding public services. Gentrification can lead to displacement and decreased diversity, while the preservation of historical architecture is not inherent in the process.
Step-by-step explanation:
Municipalities can benefit from gentrification primarily through higher tax revenues and improved infrastructure. When gentrification occurs, property values typically increase as investors purchase and renovate buildings in urban neighborhoods.
However, gentrification also has its downsides, like the displacement of longtime residents who can no longer afford the increased cost of living, the exodus of small local businesses, and a potential decrease in social diversity. Another significant concern is the preservation of historical architecture, which may be lost if not properly managed during the gentrification process.