A soft story building is a multi-story building with one or more floors which are “soft” due to structural design. These floors can be especially dangerous in earthquakes, because they cannot cope with the lateral forces caused by the swaying of the building during a quake. As a result, the soft story may fail, causing what is known as a soft story collapse. If you've ever seen pictures of massive damage after a major earthquake, you have probably seen a number of examples of soft story collapse, because it is one of the leading causes of damage to private residences.
Soft story buildings are characterized by having a story which has a lot of open space. Parking garages, for example, are often soft stories, as are large retail spaces or floors with a lot of windows. While the unobstructed space of the soft story might be aesthetically or commercially desirable, it also means that there are less opportunities to install shear walls, specialized walls which are designed to distribute lateral forces so that a building can cope with the swaying characteristic of an earthquake.
If a building has a floor which is 70% less stiff than the floor above it, it is considered a soft story building. This soft story creates a major weak point in an earthquake, and since soft stories are classically associated with retail spaces and parking garages, they are often on the lower stories of a building, which means that when they collapse, they can take the whole building down with them, causing serious structural damage which may render the structure totally unusable.
Many earthquake-prone regions have building codes which specifically define a soft story building, and prohibit the construction of such buildings. When builders apply for a permit to build a new structure, engineers may analyze the proposed plans to ensure that no soft stories are built in, and recommendations for improving the design may be included in the rejection letter, if the building department decides that the building will be structurally unsound in a quake.
Older buildings are of great concern to building departments and emergency services in areas where earthquakes are common. These buildings are often in need of retrofits to make them safer in an earthquake, and such retrofits may be relatively inexpensive, especially when compared with the cost of replacing a soft story building after it collapses. In the San Francisco Bay Area, a region notorious for its earthquakes, an estimated one in six structures are soft story buildings, which means that many neighborhoods could experience catastrophic building collapses in a major earthquake if property owners refuse to retrofit. Some insurance companies which offer earthquake insurance refuse to insure if a building is classified as a soft story building, due to the increased liability.