Sarah Waters writes good sex. The lesbian protagonists in her new novel, The Paying Guests, yearn for each other in a world where homosexuality is talked about in whispers or not at all: a genteel corner of south London, in 1922.

Their love scenes, when they finally step across the barriers of fear and social convention, are tender and, frankly, hot.

"Hot and tender?" Waters laughs down the phone from her publisher's London office. "That sounds like Kentucky Fried Chicken. I like it."

This is a writer who once described her first novel, Tipping the Velvet, as a "lesbo Victorian romp". It is an irresistible (and often quoted) line but it does her work a disservice. The sex in her novels is vivid, but so is everything else: the lovingly rendered historical details, the sharp social observations, the complicated relationships.

Waters has no qualms about the "lesbian writer" tag but above all, she is an old-fashioned storyteller. "I think we still hunger for narrative," she says. "People really enjoy long, involved narratives, regardless of their ethnicity or sexuality ... I am not writing for a particular kind of reader but I do know the kind of novels I've enjoyed – that intense, readerly escape."

In some ways, The Paying Guests is a return to the style that made Waters a success. Her last novel,The Little Stranger – a ghost story set in rural England during the 1940s – had her taut plotting and sharp focus on class and gender, but no lesbians – at least none that were outed in the story.

Some readers looked for them regardless; at the time, Waters talked about readers playing "spot the lesbian". Others – particularly among her devoted lesbian audience – were annoyed.

"Some of them were quite vocal about it," Waters says. "Somebody wrote to Diva [a British lesbian magazine] and said they were bitterly disappointed and would never read my books again. Frustrating as that was to hear readers say, I do kind of understand it.

"I loved writing The Little Stranger ... but I did miss lesbian desire. Desire is a great narrative. It was fun to get back to it."

Waters says she is a slow writer. It took her four years to write The Paying Guests. With every book, she devotes herself to a long process of research, writing, and rewriting. But it is clear that her work is a pleasure. She talks about her characters as though gossiping about old friends.

In The Paying Guests, Frances Wray and her widowed mother are obliged to take lodgers into their grand but fading home. The Great War is over, the Wray men are dead and money is tight. The young Mr and Mrs Barber arrive to live in the upstairs rooms with a vanload of clerk-class clutter: a portable gramophone, decorative ostrich feathers, an ashtray on a heavy marbled stand.

Waters depicts the early '20s as a time of upheaval. Once-solid rules about class and gender have started to wobble. "The world was still in the shadow of World War I," she says. "It was a period that had come out of that dreadful trauma and had to figure out how to move forward ... Those first years of the '20s, there was a rush of change. For some that was exciting but for others – older people or those exhausted by the war – it was alarming.

"People went into the war with a sense of confidence and came out with a sense of bewilderment. The world seemed unsafe. It had become a tense, tense place."

Waters chose the historical setting before she settled on a plot, "which might sound like a funny way to do it", she says.

But she had written about a world in recovery from war in The Night Watch (2006) – a novel set in the '40s – and the possibilities appealed. For Waters, one of the pleasures of historical fiction is exploring a period and discovering the tiny, hidden details of ordinary lives.

She knew little about the '20s when she began, so she read old newspapers, watched silent black-and-white films and pored over diaries. In an author's note she acknowledges dozens of books that informed and inspired her, from Vera Brittain's Chronicle of Youth: War Diary 1913-1917 to Lucy Bland's Modern Women on Trial: Sexual Transgression in the Age of the Flapper.

"I want to know what kind of artefacts my characters are using, what sounds they overhear when they walk down the street," she says. "But it's a fine balance. You don't want the research to outweigh your basic emotional attachment to the character. It's about finding characters that feel rooted in the period, but letting them come alive."

Waters's background is in academia, though not as a historian. She studied English literature, completing a PhD at the University of London. Her thesis was called Wolfskins and Togas: Lesbian and Gay Historical Fictions, 1870 to the Present. As she worked on it, she began to think about writing her own lesbian fiction. She never dreamed she would be published, let alone become a bestselling author with books translated into dozens of languages, adapted for television and shortlisted several times for both the Man Booker and the Orange Prize.

Sixteen years after Tipping the Velvet was published, her life as an academic feels like a long time ago. But it has left her with "a daily discipline, a kind of confidence about using research materials".

As she read about the '20s for The Paying Guests, she grew more and more fascinated with the crimes of the period.

Take the case of Edith Thompson and Frederick Bywaters. Thompson was a married woman in her 20s. Bywaters was her young lover – eight years her junior. She wrote him passionate letters while he was away at sea, declaring her love and her desire to be free of her husband, Percy. In some, she described her attempts to kill Percy: poison in his tea, ground glass in his mashed potatoes. Perhaps she was serious, or perhaps her letters were the fantasies of a prolific reader of cheap romantic fiction.

Whatever the case, the jury took the letters seriously enough after Bywaters stabbed and killed Percy. Both he and Thompson were found guilty of murder and hanged, simultaneously but half a mile apart, at nine in the morning on January 9, 1923. Until the end, Bywaters protested his lover's innocence.

"What interested me was that triangle," Waters says. "The wife, the husband and the lover. I began to think what would happen if the lover was female. It was that basic 'what if' thing. It changes everything if the lover is a woman."

There are a lot of "what if" questions for an author writing about lesbians in times past. These are not the sort of characters who make it into the history books; their lives have become almost invisible – unless you know where to look.

"The further back you go, the harder it becomes," Waters says. "In the Victorian period we have fragments of information in police or medical records, in diaries preserved by luck. It's a question of putting them together and filling in the gaps. For a novelist, sometimes having less information is easier because that's your job – to fill in the gaps."

By the '20s, she says, there is more to find. She points out that the English writer Daphne du Maurier is believed to have had affairs with women from a young age. Novelist and poet Sylvia Townsend Warner spent nearly 40 years living with another woman, Valentine Ackland, though she also had an affair with a married man.

"There were lesbian communities and networks," Waters says. "There were pockets of knowledge about homosexuality, but it was kind of restricted to bohemians and intellectuals. To others you were just two eccentric ladies sharing a home ... There were currents of knowledge you could enjoy, but you could also enjoy the currents of ignorance."

Does she imagine what her own life might have been in the historical periods that feature in her books? "Yeah. Absolutely." She thinks, had she lived in the '20s with her lower-middle-class background, she might have been a teacher. "There were very limited opportunities for respectable women who were less well off. But teaching was a way you could continue your education and have some independence."

She hopes she would have had the courage to find a woman and settle into comfortable, albeit secretive, domesticity, as some characters do in The Paying Guests. "I like to think I would have been as adventurous as that ... though you would have to be pretty brave," she says.

"I like to think that, had I lived at the time, I would have been agitating for those changes, that I would have been a feminist, even then."

The Paying Guests is published by Hachette Australia at $32.99.

ANOTHER THING

Sarah Waters is a fan of Julian Fellowes's television costume drama, Downton Abbey. She also likes the prison series, Orange Is the New Black, which she says represents lesbian characters in an authentic way.